My brother has a house in california that is facing foreclosure. He said if I can make the payments I can take over on it. Problem is that I only have about 5k to my name. I saw this as an opputunity to get started in real estate investing, but the only thing I was interested in was buying multi unit buildings. What would be my best options, if I were to take over it how can I get rid of it quickly? There is no negative equity, he just lost his job and can’t make the payments anymore.
You could try to bring the loan current to stave off the foreclosure. Is there any equity there or not? Price sells houses. There has to be a value there or you won’t be able to sell. The best way to get rid of it quickly is to price it where people know they’re getting a good deal.
Do your first Sub2 deal…
Put a sign in the yard and at the major intersections near the house on weekends, saying Owner Financing, Low Down, No Qualifying.
List the p.i. and the number of bedrooms/baths and your phone number.
Ask for $10k down (or 10% of the sale price). You’ll get it, as long as the payments are actually affordable, and not some odd-ball deal.
Open the windows, turn on the air, turn on the lights, have an open house this Saturday between 12 and 3 p.m.
Put an ad on craigslist and every other free advertising medium describing the features that would most attract the buyers of that particular house. Every house was built for a particular buyer in mind. Figure that out and start pushing their buttons.
Use a land contract to sell, keeping the deed, until the buyer pays you off. Use a loan servicing company to keep track of the payments, and provide a statement at the end of the year that your buyer can use to help him qualify for his own loan.
Try to pad the payment by $100/mo if there’s room. This way, you have more to look forward to than just $10k up front, but $1,200 every year you finance a buyer on this house. Okay, it’s not much, but it beats a poke in the eye.
Depending on how nice and new the house is, you might get more than $10k up front. I like to ask for 10% and get what I can in the shortest amount of time.
Have fun!
You don’t give any details so that we can offer some opinions. What liens are on the property? How much is the house really worth? How far behind in payments is the owner? What is the monthly PITI? What will it rent for?
With $5K in your pocket, this is probably not a good situation for you right now. Likewise, if you are considering getting started, multi-units is not the way to go. You need to look at low risk, low capital requirement type deals. For me, that means lease options.
Good luck to you and your bro.
I’d do this with a slight twist. Since he only has 5k to his name and it’s his 1st deal I’d do a mortgage assignment. In other words get it under contract sub2 but simply assign the entire thing to the buyer for the $10k or whatever he can get. In and out. Also keep in mind you’ll have to reinstate the underlying loan. That may be $10k or more right there depending on how far behind your brother is. May need to get more down.
Might even be a good gesture to split the money with your brother.