Over the years I’ve dropped in and out of these forums because I considered purchasing, but never did because the market seemed too inflated to me and I was moving around a lot. I’ve seen so many smart people here and so much good advice, so now that I’ve run into a possible opportunity, I’d like to run it past all of you. This is really unique and I have no idea if it’s even possible or worth considering, but I know you’re the ones to ask. If there’s a way, you’ll know it. :smile
Me: I have a lot of business experience but no real estate buying experience. I make good money (less this year than years past, but still way, way above average.) I am in the Los Angeles area. As you all know, the deflation is happening quite quickly around here.
There is a one-of-a-kind stunning home about 1/2 mile from where I live. The owner and I are in the same profession but we do not know one another personally. He purchased the property in 2005 for $1.2M and improved it dramatically. It is an absolute showcase: several movies, TV shows, music videos, etc. have been filmed at the property.
Total living space is ~8,000 SF. The first floor is in on a major street and has ~1500 SF which could be used/leased/sub-leased as retail space/gallery/whatever. I’m pretty sure the home is vacant now, and looks like it has been for some time. It is, however, frequently rented out for events, photography, and filming (I often see film crews at the property).
He listed the property about 18 months ago for $8M. I laughed. Over the past year, price was lowered to $7M, then $6M, then about six months ago to $5M. It’s still just sitting there. Obviously income is being generated from location fees but the first floor/gallery space is empty. I conservatively estimate one could generate ~$15k monthly between gallery space and location fees.
About three weeks ago, the mortgage lender filed a notice of default. Default amount is $160k, “opening bid” is $2.1M. City tax assessment is $1.6M.
I have very good credit - my middle FICO is probably in the 725-750 range. On my current lease, I pay ~$4500 a month plus utilities, etc. I am self-employed but can show tax returns for last two years with income to support payments / ability to pay within that range.
With the economic shift and having just cut a huge check to the IRS, I cannot shake out a significant down payment right now. In 1-2 years I should be in a position to put a good amount down.
So with all that in mind, I thought about approaching him about a lease-option, but if he is upside down in the property (likely, I think) it’s not likely to be a smart deal for me. I have no idea what his payments are, but if we assume the “opening bid” is his full balance, and he’s on a 30 year note, they are probably in the $10-11k range.
So what I’m asking all of you is: is there any opportunity here or should I just stay out of the way?
(I posted in this forum because even though it’s in pre-foreclosure, I’d been exploring lease-option.)
Thanks in advance.