Is it just me or are there litterally thousands and thousands of deals all over the country. I look through reo sites and hud and foreclosure sites all day long for hours on end and Im just having a hard time believing that all those homes out there for $5k - $30k that just need a little TLC can be sold for twice as much or more as there are litterally thousands of these things all over the country.Just waiting for someone with a little cash to buy and fix them.
Howdy Campbellgroup:
There are posts here all the time from potential investors in high dollar area who can not find deals less than $250K for a shack. I prefer the smaller numbers myself. I am buying a small 2BR here in Austin for $$28K and with $5K in rehab will have a $$600 per months rental with none of my own money. I have to pay 12% interest for the loan but wish I had millions at that rate. I would do deals like this and the ones you are talking about all over the country. LOL
Well ted looks like you and I are the only ones that see these things.As yuo can see from my other threads about deal of the month and where do you find them,Sure is starting to seem to me there is a lot more hot air in here than anything.
Hi Campbellgroup: I know that i’m a ground zero newbie, in the NorthEast(cental NY state), and i look through our papers at forclosures, and have ck’d out various RE sites on the web. Can only relate to my own area, but…if “location” plays a part, and we know that it does, i can’t imagine any 25k house here able to be sold for twice that price, even if it didn’t need any work(tho because of it’s location, it most certainly would.) So i guess if i had a ?, it would be …"What am i missing???)
I am just having a hard time thinking that anyone can get to those properties before they hit the market. In my area there are foreclosures but all go through certain realtors and the only ones that seem to hit the market for the general public\investors are those that are priced at or near market value and sold as is which most are not in the greatest of shape due to damage from the previous owners before they left. I was working closely with an investor\realtor for about a year and I thought I had a good rapport with him and he was mentoring me some what. After my first rehab which I did well with he showed me other properties-many and I ended up firing him and going to a buyers broker because for some reason he acted as if I were threatening his territory or something. I never did ask him if that were the case or not. Don’t really care, I am moving on.
Campbellgroup,
I’ve thought the same thing about some props here in Illinois—Peoria and Decatur specifically—where they can be had for 10-20. Even Park Forest has some co-ops for less than 10 (and that’s the asking price). I know where the co-ops are and it’s a pretty rough area so I’m not sure how much up side there is even with a 10k purchase price. But if I can get in for 10, put 10 in it (including a set or two of replacement tools), sell it for 40 in 2 months I’d be ok with that.
naperbill
These are great replies, I have been looking and wondering about the end value also.Realistically these houses wernt built for $5k but they are now selling for $5k-$10k Its almost impossible to imagine you couldnt make a profit off something that cheap even is you had to put $50k into it.I dont get it in some areas,I saw a duplex rented in so so so condition (people were living in it) for $39k rented at $850/mo total income.How is it even possible to sell this thing that cheap it had to cost more than that to build it.But its there so you ask your self, well If I buy it does that mean im only going to be able to sell it for $29k in a few years :-[ o what if I made $200 a month off it for 3 years .I lost $10 k in the appreciation. HOW DO YOU KNOW WHAT TO BUY? :banghead:
It’s all about supply and demand economics on these properties. Maybe moreso about demand. There aren’t really a lot of these properties you and I are talking about, but there definitely are some. The problem is that there is very, very little demand for them. Market demand will always dictate selling price. My thoughts in these situations are to buy them, fix them, rent or lease option them. I’d prefer lease option as it keeps the tenants interested in the long term maintenance of the property. Renters in these places would just as soon take the drywall with them when they move out.
Think about that—I’m comfortable with helocs and could use it to buy one for 20k, put 10k on the high end into it. That’s going to cost me around $200/mo. Or after I get it, throw it in a 30-year fixed mortgage. Any idea what a 30-year mortgage would cost on a 20k property? Probably about a tank of gas for the minivan. Add in everything else (insurance, taxes, maintenance) of another $200 and now I’m into it for $400 in a worse case scenario. Rent in any of these places is AT LEAST $600/mo, but more likely in the $750 range. So you’ve got $200-$400 +cf.
The downside—you’re not talking about the Cleavers as your neighbors while you’re working on the fix up.
Naperbill
Maybe its me Im not seeing the rent to own thing being that effective for getting tenants .I know it is done every day a hundred times over but you guys from what I gather ask for like $2-$3k up front for the option and well I just cant convince myself Im going to make up the holding cost difference waiting for one of these people to stroll along willing to put up that much money after months of passing up nonlease option tenants.
fyi—I’m extremely new to this. For that matter my next deal will be my first. But, like you, I’m hear to read, learn and go back and forth with people so eventually this all becomes second nature.
When I first thought about the lease option I thought the same things you just said. But many of these lease option people can’t come up with down payments of 10-20% for purchase or they clearly won’t qualify for higher percentage mortgages. They may be able to come up with 3-5% and they’re already paying rent somewhere. Why not make that rent payment worth something more long term?
I was talking with a guy this week who rents out a 750k house for $3500/month. Why on earth would anyone spend $3500 a month on rent. The same thing could be said about the things we’re talking about. These people have to pay rent of $800 per month because they don’t have any other choice. Optioning to purchase a house from me in two years (remember, they get an extra $50/month every month they pay on time so there’s another $1200 potentially added to their pocket) and now their credit report has some positive news on it so maybe they qualify for a 30-year loan. Like I said before, what’s the payment on a 40k house spread out over 30 years. If these people pick up the option they’ll now be spending probably $200/mo less than they were before when they were renting from me.
In my book that’s a win for me as I’ve got 5k in positive cash flow over 2 years. There’s a tenant who’s interested in the long term value of the property so he probably won’t take the drywall. I’ve also sold my property for 25% over what I put into it including repairs (if we buy for 20k and put 10k in and the option calls for a 40k price).
I’m hoping one of the veteran’s here will read what you and I are talking about here and correct me in the areas I’m off base on.
Naperbill
These properties that you see being sold for 5-10k, are you sure these are the mortgages or a second lien holder foreclosing?
I’ve seen these type of properties in my area too, not that low of a price, more like 20-30k but valued at close to 100k.
It just seems to low to me to be their mortgages.
Am I wrong? Could these actually be there mortgages or a second lien or something else?
aznewbie,
Im talking about the actual asking price is $5k- $10k free and clear of all leans by a realtor.YES I know they are in the getto and need new roof floors walls electric,bla bla bla… Im told: depending on where you are I know; but the price of construction for a new home is around $58/sq foot nationally.If these homes are 2000 sq ft at $10k purchase and $60K remodel - the fact that its an old home made new I would think you would still hava a value of $90K give or take a few $'s.which puts you $20k ahead. Now these homes are selling retail in these getto areas rented or rehabbed for $45k .IT DOESNT MAKE SENCE.What about the people who lost these homes we are looking at .Did they buy them thinking what we are CASHFLOW BABY…and the market went south and they lost everything in an area that so many guru’s preach without actually saying is a no loose no brainer money making field.Or are these homes the result of the average american that doesnt have a clue how to budget a check book or piss poor slumlord management that the city shut down and now we are in a position to capitalise on their misfortune.I like to think the later thought. ;DWhat do you think?
I’m not sure what you are asking about my thoughts on this but…
These homes are in the lower income parts of the city right? So you obviously know of the crap that can/does go on in these areas.
If it were an owner occupied residence the owner probably had some unfortunate thing come up and lost the house.
If they were rentals it was probably a tired landlord type thing
This is the main reason I would not buy in these areas for cash flow. I personally do not want to deal with that kind of stuff.
I would buy to rehab or wholesale though. There are always going to be people in need of affordable housing…