PLEASE HELP!!! What would you do???


OK, here is the scenerio:

I found a lady that is ready to sell her second home. She has rented it to people that she knows and has had a terrible experience with it. She is VERY eager to sell and wants to sit down and talk about doing something soon. She said that the bank has been threatening to foreclose, but she always paid up what she owes before they go to the next stage. The house is in a nice area right off the freeway and I think that it would be VERY easy to rent.
Here are the numbers that I am working with:

Current Rent = $850
Her Current Mortgage = 600 (not including an escrow?!?!?!?!)
Her Taxes/Insurance = approx 2000 year / 170 month (seems high?!?!)

Amount Owed = 69,000
County Value = 81,000 (questionable)
Comps from realitor (2005) = sold 75,000 - 81,000

Here are my questions:

  1. Would you just buy it or do a sub2 and take over her note?? I think that if I took over her note and added an escrow account I would be losing money each month.

  2. If you bought this property straight out, how much would you offer? I was thinking of offering about 60,000…leaving her with 9000 to pay off. Do you think that would offend her?

3 If I do take out a loan as an investor, would my rate be atleast 10% or could it possibly be lower??

  1. Can you tell me what all is included in the ESCROW? I don’t know if I calculated that right??

  2. Should I just walk away and keep looking??

Thanks in advance to answering ANY of these questions!! This site it the best!!

New Invester Trying To Learn ::slight_smile:

  1. Not if you think your payments would be too high to a potential l/o tenant or a contract for deed buyer.

  2. You can’t worry about offending people with price. You have to make offers that work for you.

  3. Obviously depends on many factors: credit, income from property, etc.

  4. Taxes and/or Insurance

  5. You need to evaluate every way you can make money on this thing. If all signs point to “no” then you know what to do.

By the way…what’s the interest rate on this loan?

Her interest rate is currently 10%. Thanks for the advice!

that’s really high! it’s looking more and more like a deal you should walk away from

You could probably offer her 69k and get 80/20 financing thru any one of a number of vendors. My math shows that the current ‘best rate’ for this kind of financing would be 6.6% on the 80% piece and 10.1% on the 20% piece which should give you a P+I payment of $475. Add in the $170 for the insurance/taxes and you end up with positive cash flow of $200 month ($850-$650).

If this doesn’t work for you I’d lower the price a good 10k to get more robust cash flow; stop worrying about offending her.

When you say ‘best rate’ what type of credit score are you talking about. I have about 660…it is not so good. What type of rate do you think I could get with that score?