I wrote a letter the owner of a vacant house and never got a reply. I found out he owned a local liquer store so I went and bought a bottle of wine. I struck up conversation and told him I was the one who wrote the letter. I told him how my uncle used to live in the house and I like the layout better than my current residence. The house has been vacant for 10 year other then him going in there for general up keep. As I was talking to him I could tell he was really thinking about selling me the house. I mean he just sat there rolling the bottle of wine on the counter and saying nothing to the point where I was uncomfortable.
He bought the house for 23k in 1983. Today in updated condition 120k
It may need a new roof soon but I can’t see more than 20k in repairs counting a new roof. I think this is actually a very high estimtate. (sight unseen)
Although I have no reason to think this will end up being a deal. I want to follow it until I know it is not. At least I get experience.
If I can get him to sell it:
I can work the number on my own to find out what I should pay for it.(after an inspection)
The thing is I have a mortgage for $838 (paid 95k on a 120k house, rehabbed/updated by seller, not a deal) and can not qualify for another mortgage.
The house across the street from mine rents for $1100, The houses are identical.
I was going to get a 6 month interest only loan at a high percentage to buy the property and update it. Rent my house out for $1000 (easily attainable)
Move into the house and get a conventional mortgage with an HELOC (after update etc).
Is this a good strategy?
I know that I would not be cashflowing on my first house but it needs nothing and has 20k equity. Selling it is not an option.
I would not assume too much; I’m willing to bet that he was not too happy to hear that you having been poking around into his real estate holdings.
IMHO, far too many people assume that owners of vacant property are eager to sell. I have chased quite a few deals like this and never really gotten anywhere. That’s not to say it can’t work out, but it not a sure thing by any means. I think chance of getting a contract in place is no better than 1 in 10.
Moreoevr, it does not really sounds like you have a solid plan that you can execute without put yourself at great financial risk. That’s not a great position to be in when approaching a seller.
this deal hasnt become a deal yet as you know. have you asked if he wants to sell? that would be the first step. then, you should be prepared for a YES from the potential seller (which I suppose is what you are doing now).
Be prepared to listen to him attentively and see what kind of seller he is. Owner financing? lease option? cash? On fixers i often get great terms from the owner at least for a while “to fix up the place”. If hes not wanting to sell now, suggest to rent it with the option to buy in the future.
Just a few ideas
I wouldnt waste too much energy on hypotheticals. get the thing under contract! go for it! you may even get a bottle of scotch out of the deal
First, you need a firm plan. You sound like you want to do a rehab and flip. You also sounds like you need to use an HML. Therefore, the idea of renting out your current house and moving in there will not work (HML will not allow most likely) plus living there will only slow down the process.
So, go talk to a HML and make sure you can get some money based upon you target purchase price and estimated ARV.
Then ask the magic question “so, do you have any interest to sell?”.
If you get a positive response, then you really dig in to the details of haggling on price, inspectiojns, estimate of repairs, etc. Also, if he does get give a positive repsonse, then his next question will be how much. I would NOT pop a number but rather deflect the question by saying you would need to see inside, etc. Also, I would avoid implying that you going to occupy the house if you intend to rehab and flip.
If you intend to occupy, then it would seem like you are in a tough position to close the deal. Sure, he might be willing to do seller financing, but many sellers dont’ want to carry back the whole thing (especially if you are looking for a bargin price).
Bottomline, make sure you can close the deal (financing) and then get to the point and ask if he is interested.
He told me he was not sure if he wanted to sell it or rent it. He wants to do something but at this point has put little thought into it. It is the same as my house except I like the layout better. I would like to live in it and rent/hold my current house. My current mortgage is around $850 and I could rent at $1000 easy. I know this is not cashflow but my area show promise and is one of the only areas that you can get a house for 120k. It is close to jobs and is a a safe suburb.
If I can get this house/rehab/ and move in all for a nice price it does not matter how much my rent and mortgage are on my current hosue since It will be compensated with my lower mortgage from house #2.
My problem is I have a OO loan that is only 3 months old. I am thinking buying rehab/rent until my OO loan allows me to move.
I also have unlimited hours available to work at my job if I choose to should I have to carry for a few months without a tenant. Not what I want to do but it is a back up plan.