Well, maybe I didn’t choose my words carefully enough. I haven’t made up my mind to do this deal. I’m just trying to determine whether it’s a deal to be done and if so, what’s the best course of action to get it done. I really do understand what people are telling me. And, I’m moving away from allowing them to stay in the place.
Let’s say, I do acquire the property subject to the existing note. And, with the terms of the deal, they have to move out before any monies are exchanged. No problem with that at all. Is this a deal that should be done? It seems like everyone has jumped all over the possibility of me letting the sellers stay in the place. At this point, I’ve been knocked in the head a few times and it was worth it. I’m getting away from that. Again, given the numbers, is this a deal to be done in your opinion?
Numbers: (after acquiring sub2 I do a refi of the prop to 150k which includes loan payoff + lien payoff + closing costs at 8% interest).
FMV: 190k (conservative)
Repairs: 15k (septic system replacement)
holding costs: 1500/mo (PITI) * 6 = 9000
Sell cost = 2k (no realtor)
Therefore: 190 - 15 - 9 - 2 = 164k. That’s still 14k left on the table.
Or, instead of doing a sub2 I could just buy it outright. But, I’m trying to get away from the 10% downpayment. If I got it sub2 and then did a refi I could avoid that AND potentially pull cash out to repair the septic.
So, is this a deal to be done?
Honestly, I appreciate all of the responses and knocks in the head. They are well worth it.
I have read all the posts, I agree with everyone, Anne especially. The septic problem can be horrendous in and of itself. Have you done a percolation test. I know of a case where the land would not percolate and the party had to buy another lot across the highway, hydraulic a line under the highway and pump the septic over to the other lot…cost a helluva lot more than 14K.
You have said nothing about the interior/exterior nor have you allocated any costs to these. In order to get top price, it must “glitter and glow” and “outshine” the neighborhood…not be in need of paint, landscaping, carpet, how about the roof…just had one done…it too ate up a good sized chunk of your 14K.
Stop-Look-Listen…Investigatge BEFORE you invest.
Good luck,
========>Bill
I also agree that you are far too emotionally involved with the property.
Every time I’ve gone in to do a major repair (15K for the septic would qualify for major repair) there have been other unseen repairs that also needed to be done and that have cost another $5k-$25K. You have no contingency funds built into this that I see.
I’ve heard it said that the top 10% of profit is air, and this is a good example of how $14K could disappear. I would not do this deal unless I wanted the house for a long term rental and could make good money off the cashflow. There’s just not enough equity in this deal, in my opinion.
It’s in pretty good shape. Exterior just needs some cosmetics (trim bushes, etc.). The septic is the major issue. Again, I will certainly take your good advice into advisement. I’m starting to lean away.
And, btw, where is my emotion in this deal? I’m simply trying to get everybody to understand where I’m coming from. It gets down to 90% numbers and 10% gut. I don’t think these numbers are outstanding but I also don’t think they’re that bad. Profit is low-balled and expenses are high-balled. And, yet there’s still money left on the table. Just out of curiosity, what, in any of my threads about this post has got you thinking I’m too emotionally involved? This isn’t a dig back at you. I’m just trying to understand where you (and others) are coming from with that statement. I think everyone has gotten my passion for discussion confused with a high emotion about the property.
But, again, I appreciate all of your comments: good, bad or indifferent.
I recognize emotion in a deal because I’ve been there!
I do rehabs because I love the idea of taking something junky and restoring it to its former glory. My partner and I got emotionally involved in a large duplex renovation that should have taken us under. 2.8 years later we’re still working on it. When it’s rented it will cashflow like crazy, this WILL be worth it in the end. It’s from experience that I say don’t get emotionally involved unless you’re going to make BIG money!
I think people see your emotion, when, in the face of advice (from experienced investors) to the contrary, you continue to argue for the benefits of doing this deal.
I’m guilty of talking myself into not-so-good deals too…just recently in fact. My wife & I went to look at a fixer in our neighborhood–asking price $300K. I told her that I wouldn’t offer more than $215 on it, but just 2 hours later after getting myself hyped up about getting a deal right around the corner from home, I sat down with my realtor and wrote an offer for $250K!
Fortunately, I was outbid, and I learned an important lesson (again): there’s a big difference between making a purchase and getting a deal. Now get out there and get some deals!