very good foreclosure

General Real Estate Investing
1

i posted this in other forum as well:

foreclosure on Long Island -

Comps From Zillow.com - and I know the area:
396k
413k
380k
489k
446k
383k

This home looks to be very similiar to the neighborhood homes - just neglected, but has VERY nice stone work and is a corner lot, across from a home currently asking - 529k (this house is updated cape - with smaller lot).

this foreclosure happens to be well below market (most “foreclosures” on the island will run you over 250k and most are in the low 300’s).

So, I know this much:
On the day of auction, successful bidder needs 10% of their bidding price on the spot (via cash or certified bank check).

30 days from date of successful bid - buyer needs the remainder of purchase bid price.

property is sold “as is”.

I figure, even a successful bid of 190,000 would be an EXCELLENT prospect.

given the “cooling” market here (despite the fact that houses are still moving according to realtors i speak to) - even if this house was rehabbed and put up for sale for say…335,000 (and that would be a steal) - it might look something like this:

Bid Price: 190,000 (highest amount of my company’s bid)

ARV/Sale Price: 335,000

Gross Profit - 145,000

Expenses:
Rehab 25,000
Legal 3000
Advertising 1000
Holding (1 full Year):
Taxes 5500
Insurance 2500 (200 month)
Lawn 500
Utilities 2500

Misc 5000 Total Expenses: 45,000

Net Profit 100,000

41.6% Return

Now the question is how many variables did I leave out?

What are the possible pitfalls?

And will 190k get me the property?

And how can I have this money in 30 days after bid date? Any referrals/suggestions? Anyone know of any HML that will invest in property with pay out being contingent on sale of home (another words - there’s no monthly mortgage to deal with - HML simply gets X% guaranteed from sale of property).

This house could easily be put on the market as well for much higher than 335,000 - I’m just adjusting for a 15% or so reduction in prices due to market cool off. Also, a projected holding of 1 full year at that price with the flexibility to go lower in price or offer buyer incentives is very conservative. Am I wrong?

Exit Strategy:
Buy WELL below current FMV
Rehab with RSM Construction and Ambra Woods Inc. (my brother and uncle - licensed contractor).
Advertise
Sell

Even if you adjust for a 25% reduction in FMV due to projected market cooling - ARV/Sale Price - 300,000

There are over 100 homes for sale on MLS in this particular town. And yes, on Long Island it is increasingly becoming a buyer’s market - but that buyer still is shelling out over 350 in most cases for anything that has 3 bed’s and a bath.

Thoughts?

2

Looks to me as though you’ve done your homework well. Don’t forget closing costs! I usually figure 6% of the purchase price for closing costs. If you plan on rehabbing it yourself you may have to pay closing costs twice. When you buy and when you sell.

The key here is getting the bank to accept your bid price. Remember you have to provide a case to the bank. In your case you need to include your offer and evidence (that the bank will believe) to justify your offer. If your evidence doesn’t justify the offer they bank wont take it.

Also, I would get comps from someplace other than Zillow. It’s great for a quick ballpark but the lenders don’t go by those numbers. Get actual sale info to use as comps.

3

The bid would be a competitive bid at auction. need 10% of bid in form of CASH or certified check. So you go there with the 10% of your prepared maximum bid price.

You bid successfully - give money to lawyer who holds in escrow - you set a date - 30 days to close - DONE.

So yes I need to factor in closing costs - but the bid is competitive and the bank does not “approve” the bid, they simply see the 10% and expect a prompt 30 day closing date.

IF you don’t have the rest of the $ - you lose your 10% down.

4

That sounds more like a sheriff auction purchase than a short sale.