My question is -
on pre-foreclosures, what is a good age range for the mortgage to have originated?
Of course I know that if a mortgage is 10 years old, there will be more equity, etc. Are mortgages that have originated within the last 1-5 years good choices for flipping?
I believe so due to current market conditions. I am playing with foreclosures. Tons in my area, the home values have increased dramatically! What was 100k 2 years ago now goes for 150-170k.
Scenario - someone bought their home 2 years ago for 100k 5 blocks from me. It is in great condition but let’s pretend it needs interior paint an carpets. They are pre-foreclosure. Let’s pretend they are willing to settle for the balance of the mortgage plus 5k pocket money. Let’s assume a cost of 110k total. It possibly could be flipped to an owner/occupant in the range of 140-170.
This is happening all around me locally and it seems like the deals are good but I want an investor’s point of view. Any investors care to share their opinions?
Almost sounds too good to be true. Try to narrow down your comps. The $140,000 to $170,000 range is a wide range. Lets assume you are in for a total of $110,000 and you sell for $140,000 on the low side. That is $30,000 profit. That would be great. Right? Just a few questions here however. How did you but the place. If you usesd hard money and had to pay cash you spent $10,000 on points, fees, prepaid interest, appraisals, surveys, etc. How fast are houses selling? If there are tons of foreclosures there has to be problems with the market conditions or the folks could sell their own house for top dollar. Lets say $1000 per month carry costs for 6 extra months. Now how will the buyer find out about the home for sale. Lets add 5% commission to the expenses, thats another 7 grand. You will also have a few grand in other sales expenses including attornet fees and title policy.
If you can buy subject to the mortgage and cure the loan and then resell fast you will have some really great deals. Keep in mind that HML’s typically loan 65 to 70% of the after repair value because they know the expenses involved in holding and selling property.
I hope I did not burst your bubble but it pays to plan ahead. I did a deal with the same numbers and it took longer to sell and cost more to fix and we got less for the house as the market took a nose dive the day we bought the place.
You certainly did not burst any bubble at all Ted.
Honest, straight forward REAL advice is always invaluable even if it bursts a bubble!
I have considered all that you wrote about. Right now I am just flipping them. I am not holding but I still do consider the costs because any investor will be doing the numbers for his/herself anyway.
Yes, this area is too good to be true. I don’t understand it myself. All types of properties have suffered the same fate…up,up,up! Why anyone would buy these properties now puzzles me even more but they are moving like crazy. My area is a very densely populated, middle to high income area. Excellent schools, upscale shopping areas, close to major highways and transportation. That said, I can understand families wanting their kids here but I don’t understand why the single people are paying such premiums. lol
Now if Greenspan keeps raises the rates, this will all grind to a halt.
By the way, my comps were in a wide range because of the mix of properties. I was trying to represent the area, not a specific property. Sorry, I should have been exact. lol Townhomes, condos, SF, upscale apartment buildings. It is all here.