I’m a newbie (I see you rolling your eyes : ) who needs some advice on a possible deal.
Lady called with a house recently appraised at $129,000. She owes $80,000 on the 1st with Washington Mutual and $15,000 on the 2nd with Countrywide. She is 3 months behind on the first ($745/month = $2,235 total) and 2 years behind on the 2nd ($152/month = $4,000 incl penalties).
The house needs about $10,000 in repairs. The owner says she just wants to be done with the property and needs $1,500 - $2,000 moving money.
My wife and I are going to meet with her this week. What do you suggest we do, if anything, with this property?
Can I make up the back payments on the 1st and take it subject-to, and then try to short the 2nd, pay it off, and then sell the house quickly at a discount? As you can probably tell, I don’t know much…but I’m teachable.
Thanks so much for your time, patience, and advice in advance.
A lot of investors use the 70% Rule. Do not pay much more than 70% of the comps or appraised value less fix up. This will allow for all the expenses in closing the purchase, holding the property, and sales expenses. With your property here 70% of $129,000 equals $90,000 less repairs of $10,000 would give you a purchase price for cash of $70,000. This probably will not work so you will need another exit strategy or plan. Doing a short on the 2nd and buying subject the 1st will take some cash. What amount were you going to offer Countrywide. They seem pretty flexable if they have let it go for two years without foreclosure. If you can get it cheap enough and get it sold fast enough you may be OK. It is really a marginal deal. If it were in better condition maybe a sweet deal. Pretty close. I would look really hard. PM me and I may be able to help more personally.
Happy Holidays and Thank you,
Ted P. Stokely Jr
11505 Sw Oaks
Austin, Texas 78737