It’s been a year now since I stated studying real estate investing, but the problem that I still have is evaluating properties and running the numbers. I got several calls this week from sellers and here is some of the information I received.
Seller #1. Has a 5bd 4bath home located in a nice surburb. Currently 2 months behind @ $4400.00. Couple is getting divorced.
1st mortgage balance is 225k interest rate @ 6%
2nd mortgage balance is 36k interest rate @ 5.15 %
Asking 269.9k
The house is in good condition only needs painting and tile n kitchen updated. I went to zillow to do a quick search for comps and i got the lowest being 193.5K 4ba/ 2.5ba, highest 375K 3bd 2ba. All sold last year. No house with a 5 bedroom( I will ask my realtor to pull more recent comps)
Is this even worth pursuing? If so, would a subject to be a good way to purchase this? Or a short sale(if this is the best exit strategy I would have to refer this to someone who does short sales)? If a suject to is better how much do I offer? I found a couple that is looking to rent a house in this area
Seller #2. House is in a ok neighborhood ( I am scheduled to go see the house later this week.) Seller said the house needs 5k worth of repairs. The seller is wanting to relocate.
The mortgage is paid off.
Asking Price: 50k
Again, I looked on zillow.com to get an idea of the comps in the area lowest was 22k highest was 90k.
What would be the best method for purchasing this property? I thought of either doing a subject to or wholesaling it to another investor.
Can any seasoned investors please help me evaluate if the above properties are worth pursuing, and how I can structure a deal for both?
There is nothing to evaluate. You haven’t provided any useful information with which to evaluate the property. One extremely important thing you need to know to be able to evaluate a property is an ACCURATE number for CURRENT market value. Your comps are all over the place and in the first case, from LAST YEAR. So, my suggestion is to do WHATEVER IT TAKES to learn the market values of property in your target market area. A good start would be to get out of the house and go look at 100 houses (inside and out) that are for sale in your target area. You will know that you have succeeded when you can spend 15 minutes looking at a house and KNOW it’s current market value.
…and STOP USING ZILLOW! IMO it’s ABSOLUTELY USELESS!!!
Year old data and the ‘comps’ are from $195K to $375K. That’s a span of almost 200%!
Mike is giving good advice. This is not a computer-driven field. Also, the ‘value’ of a property is driven by “What are you going to do with it?”…if it’s going to be a renatl, you need to know what it will rent for and how that rental price drives the ‘pay for’ price.
Do some more research on the paid-off house. There is NO loan to be taken “subject to”. The house is free and clear. The seller can carry the mortgage or you can get a loan and cash him out. It’s all about value.
My niece and I bought a house last year. The neighbor across the street from one of our leased houses came over and said, "I hear you buy houses. Mom has gone to a Nursing Home and we want to get rid of the house.
We looked at the house. Nice stone 2-bedroom, over-furnished with 30 years worth of stuff. We said, “How much do you think you might want?”
The neighbor said,“$20,000 should do it, Mom only paid 6, and that’s all she wants; I just want to get rid of it with no Realtors or appraisal.”
My niece’s eyes got wide. I said, “Okay, that’ll work, it’s a deal then. See you at closing next week.”
We got an appraisal a month after the purchase for $32,000 (which I thought was too low).
The point of all this is, go talk to the seller and find out what he wants. Just listen. Maybe there is something there for you to buy. Do your homework and know the value of that house.
My niece and I bought a house last year. The neighbor across the street from one of our leased houses came over and said, "I hear you buy houses. Mom has gone to a Nursing Home and we want to get rid of the house.
We looked at the house. Nice stone 2-bedroom, over-furnished with 30 years worth of stuff. We said, "How much do you think you might want?"
The neighbor said,“$20,000 should do it, Mom only paid 6, and that’s all she wants; I just want to get rid of it with no Realtors or appraisal.”
…and that’s how a successful investor gets deals!!! What you should learn from this is that you need to get out of the house and meet people! Sitting behind a computer will NOT get the job done.