OK, I know I am probably going to get slapped for this, but how do I do this…
Found the ugliest house that is totally distressed and appears that the current owner started a gut rehab (have seen pictures of the interior and it’s down to the studs for the most part) and now wants out. I have never even thought of buying a house in this condition for personal use or otherwise (in fact I found it on accident). I have never bought any kind of investment property; in fact the only home I have ever bought is the house I currently live in. Like I said before I found this house on accident, I was thinking of putting my house on the market so I was just seeing what else was out there. However, ever since I saw the FSBO listing the idea of purchasing this house and rehabbing it for either us to move into or selling if I can’t meet the ongoing financial obligation has not left my mind. The problem is:
- I have no funds.
- I have no experience with this type of property
- The owner wants a cash sell, probably because it’s currently uninhabitable so I don’t think you can get a traditional mortgage
- I am unemployed (SAHM) so even if I found a way to finance it I have no income
- I would need the purchase price plus cost of the rehab
This house is in an area where most of the area has already been rehabbed or leveled and rebuilt on, average sales price for the area 450K-550K. Property specks: Built 1965, 3365 sqft, .27 acre, 2 story, 7 bed, 4 bath, pool…asking 250K, foreclosed on in 2005 for 205K, purchased 2005 for 211K, I think there is some room for negotiation here. Supposedly the current owner has already sent it through planning and structural engineering.
Am I crazy, is this doable for the average joe? Is there a way to get around the problems associated with the fact that I have no experience/no funds?
Even if you got a hard money loan that covered the rehab plus acquisition cost…how would you pay the monthly holding costs? I don’t think you can do this with no funds, no income and no partners.
If you can sell this for 550 instead of 450 this is certainly a profittable deal. Provided you can get the renovation done for 100k or less. If you can, then there is no reason why you can’t finance this 100%. You will need to find a good HML that will allow you to roll the monthly payments into the L/A. Along with the closing costs.
It’s always easier to do things with money but if you don’t have any you just need to look a little harder.
The way to get around having no experience is to find someone who does. In this case a general contractor and real estate agent.
Thanks for the replies. More questions, of course…If I wanted to pursue this how would I go about doing it? Do I approach the seller first and offer a contingency bid based on qualifying for a HML or do I go to an HML first with rough numbers just to get a proof of funds letter and then approach the seller? Then how do I go about gaining access to the house before finalizing everything to get my contractor quotes? Like I said originally, this was an accident (I wasn’t looking for anything like this) so I just don’t know HOW to pursue acquiring the property. ???
Also, I was pm’d that I might be able to qualify for a rehab loan, how do those work? I have OK credit (720’s last time I checked). I know this is like explaining calculus to a kindergartner, but any help is really appreciated.
justme,
Two things:
1st, you are NOT ready to do a deal, any deal, much less something of this caliber. Unless you really have a serious desire to lose alot of money and possibly your good credit, DO NOT ATTEMPT TO DO THIS DEAL. My suggestion, go to your local REIA group and meet some local investors, and give it to them for a possible birddog fee and/or in exchange for being allowed to follow them through the deal. It’s possible that you may be able to earn some $$$ and/or learn the ropes, all without risking a dime.
2nd, if you have a 720 credit score, that’s much better than just ‘ok.’ Guard it well.
Raj
Raj,
OK, now I am getting somewhere, (maybe)? How do I go about birdogging the deal? Remember calculus to a kindergartner…
Also, you say I am not ready for this caliber of a deal, why? Because of the numbers? The median home range in my area is low 315k, so I am just curious as this property is not within the “median” home spec. I am not trying to be cute, however, I am trying to find some more definite information…
Thanks again.
justme,
You’re not ready to do ANY deal, much less something of this caliber? Why, you ask? Simple. You have no funds, you have no job, you have no experience in REI at all. You have a $100K range of value for the property (need to be within $10K max), you have no estimate of repair work and no way to pay for it if you did. Heck, you don’t even know how to birddog the deal.
Not trying to be rude, just trying to prevent you from possibly making a huge mistake.
Same suggestion, go to your local REIA group and learn.
And just so it’s clear, by “caliber” I mean this deal does NOT sound like a simple patch, paint and carpet deal. It’s going to require some major funds and major knowledge to come out of it without a losing your shirt.
Raj
I don’t know what school of thought everyone else comes from but I still believe that the only stupid question is one that is not asked.
Your statement: “My suggestion, go to your local REIA group and meet some local investors, and give it to them for a possible birddog fee and/or in exchange for being allowed to follow them through the deal.”
So I went and looked up my local REI clubs and got meeting schedules and came back and asked: “How do I go about birdogging the deal?
Your answer: “Heck, you don’t even know how to birddog the deal.”
Thank you very much for your input; however, as a personal preference I don’t like chasing my own tail.
No, friend. You asked why I don’t think that you’re ready for this, or any other deal, at this point. In my detailed answer, I stated that you didn’t even know how to birddog the deal. Now, since birddogging is the most basic form of REI, don’t you think that it would be a good idea to at least know how to do that before jumping into the big leagues of REI (and this property is the big leagues and it has nothing to do with price)?
As I said, I wasn’t trying to be rude. However, I AM to the point. Again, sorry if that offends.
As to birddogging, in a nutshell, you simply find an investor, tell them about the deal and setup a payment fee if they buy it.
Here is the definition of bird dog from the investing glossary at the left:
Bird Dog - someone who identifies a potential good real estate investment opportunity and passes that deal on to another investor for a fee
Here are some articles from that section at the left:
http://www.reiclub.com/art/find.php?cat=Bird%20Dog
Besides those, the best place to learn about birddogging is still the same, the local REIA meetings.
Hope it helps,
Raj