Bad move at sheriff's sale!! Get out while I can, or get to work?

Rehabbing, Fix and Flip, Rental Properties
1

I’ll try and keep this as brief as I can.

 I just placed the high bid on a property at Sheriff's sale that is in the path of major development in a rapidly changing inner-city 'hood just blocks from my own home in Philly.   

  My (clearly insufficient!!) research included several walk-bys, research on the tax and utilities due, and one lengthy chat in a modest living room with the elderly "tenant", during which she shared that the owner passed 4 years ago and thier children haven't kept up.   

Since my bid,  I asked the tenant for a full walk-through - though I made clear she had no obligation to do so.   Beyond the foyer and living room, the place is as good as a shell - water damage, barely patched hole in the roof, ceilings falling in, holes in the floor...  She's essentially been squating rent free for 3-4 years in this disaster.   :shocked

 My bid was $21K,  with current comps from $55-$65K.   Word has it that prices will rise to $150-175K in the next 5 years thanks to $14 million in development in the acqusition stages with city govt. cooperating.   

  My intent was to hold the property as a rental (as an occupied property, it appeared to be a bargain!),  but now realize that this property will not pass any conventional lender's inspection.    :banghead


I can cover the entire purchase price with equity lines on my other properties and gut the damn buildng myself.    Could I then refi the shell with a clear title and get enough cash out to make $15-20K of repairs with hard money?     %75 of after-repairs value is at least $40K,  leaving me about $20K beyond my bid.  Does that math fly?

   Or, as a part time investor, would I be better off telling the sheriff I can't pull off the financing on this bad boy and write off my $2K deposit to a painful learning experience?    :anon

   I'd appreciate any ideas, comments or suggestions!    Please be gentle!!!
2

Look into a renovation/rehabilitation mortgage. I know Countrywide offers a program and other lenders do, too. The loan is based on the ARV (After Repair Value) of the property. Current condition won’t DQ you from getting the loan and you can finance all of the repairs, presuming you spend wisely and keep the total cost at or below ARV.

Also, ask your bank; if you are a valued customer, they might be willing to modify a construction loan to fit a rehab. If you’re not a valued customer, time to change banks. :slight_smile:

In case you come across it, the HUD 203(k) renovation program is for owner occupants only. I used that one myself about 10 years ago.

3

I agree with PC42. This is not a bad deal. It depends on how much the rehab will cost and how much you can get for rents.

I am more concerned with your SYSTEM for doing real estate. Do you have a target type of property in a target neighborhood at a target price? Do you have a repeatable plan? If you are going to make a million dollars this plan won’t get you there, unless you know where every sheriff’s sales are located in the path of development.

4

Just curious as to the street that your property is on? Also, what are the details of it (i.e. beds and baths). I also invest in the N.Philly area. I could lend some advice. Does the 21K include back taxes and utilities? Let me know. Thanks.