Please Help! Nervous about first deal! - Posted by DavidCAL

import · July 22, 2001, 2:10am

Posted by DavidCAL on July 23, 2001 at 04:33:38:

It was appraised at $135 on year ago. The market has increased a bit, so I figure $140 is about right. Remember, this is L.A.!

import · July 22, 2001, 2:10am

Posted by DavidCAL on July 22, 2001 at 02:10:03:

I just got a purchase agreement signed for the first time (subject to). Is this deal worth closing on?

ARV $140K
1st loan balance $122,500
Arrears $5500 (5 months)
Repairs $5000
Cash to seller at closing $500
Monthly payment $1070 PITI
Market rent $800 front house, $350 guest house

This is a 644 square foot cracker jack box with a tiny guest unit. Property is located in south central L.A. (war zone). Needs repair of drywall (3 holes in walls), paint inside and out, 5 miniblinds, and new carpet (est 5K?). Arrears must be made current at closing in 10 days. I plan to flip it to another investor in my club for $1000 to $2500 and assign it. Should I bother with this deal? $10 earnest money, not a lot at risk so far.

Thanks,

DavidCAL

import · July 22, 2001, 4:25pm

War Zone? - Posted by JD

Posted by JD on July 22, 2001 at 16:25:48:

140k seems like an incredible price for a property in a War Zone. What would the property sell for in a middle class neighborhood?

import · July 22, 2001, 1:40pm

$122,500 includes the $5500 arrears - Posted by DavidCAL

Posted by DavidCAL on July 22, 2001 at 13:40:43:

Thanks for the response. I’ll flip to an investor or pass before closing.

import · July 22, 2001, 10:44am

Re: Please Help! Nervous about first deal! - Posted by BillW.

Posted by BillW. on July 22, 2001 at 10:44:03:

David,
Your margin here is INCREDIBLY thin. If you ALREADY have someone to assign this to and they are committed, just do the assignment and take what you can get.Otherwise, I wouldn’t take possession with such a narrow margin in a war zone. It takes a special type of person to be comfortable in these type areas. One of the major problems is that there is generally not much appreciation there.You have to make all your profits going into the deal. If you or the other investor is comfortable holding property in these type areas, fine. They can produce decent cash flow ,SOMETIMES, but you have to look for properties that are well under market value and sold by MOTIVATED sellers. This one doesen’t look like it will have much cashflow.
As a side note, there are ways to increase cashflow. There are certain programs available through the state, county and locally in some areas where, if you participate, you get a premium price for the rentals. You’ll want to check with them to see what, if any, type programs are available.
Good luck and keep looking for motivated sellers,
BillW.

import · July 22, 2001, 2:13am

Clarification $122,500 includes arrears - Posted by DavidCAL

Posted by DavidCAL on July 22, 2001 at 02:13:49:

Clarification:
1st loan balance is $117K plus $5,500 in arrears

import · July 22, 2001, 7:19pm

Or… - Posted by DanT

Posted by DanT on July 22, 2001 at 19:19:09:

what would it sell for in Oregon. Or Ohio. What difference would it make what it would sell for elsewhere unless you plan to move the house. DanT

import · July 22, 2001, 10:15pm

Re: Or… - Posted by JD

Posted by JD on July 22, 2001 at 22:15:54:

All war zones that I am familiar with are characterized by negative lot values. In other words, a brand new house (if such a thing existed) in a war zone in Milwaukee or Chicago (cities I am familiar with) would have a value of 40-60k. Quite a bit less than what it would take to build such a house. The 140k FMV for a house in a war zone is contray to my experience. Hence my inquiry.