Posted by Joe on March 18, 2003 at 12:36:57:
I didn’t even notice that type-o. I guess a spell checker wouldn’t have caught it either.
LOL
Would you do this Sub-2 Deal? - Posted by Kristine-CA
Posted by Kristine-CA on March 17, 2003 at 21:54:55:
Yet another subject-to deal coming my way, and wondering if I should take the plunge:
Pre foreclosure trustee’s sale scheduled next month
Duplex (2 houses actually)
FMV 80K
Loan balance is 68K, arrears is $3800.00
PITI is 672.00, current rents total 900.00
Owner(s) are divorcing and know that they can’t get much equity out of it. They’ve had offers from another subj-to investor that offered to take over payments and take their deed with no walking cash.
Would you do this one? $3800 to bring it current and maybe 3K cash seems pretty reasonable to me. What am I missing?
Thanks for any thoughts. Sincerely, Kristine
Re: Would you do this Sub-2 Deal? - Posted by JohnP Sfl
Posted by JohnP Sfl on March 19, 2003 at 07:20:16:
Kristine,
What do the sellers want? The deal is not so great. I would see what they are looking for? Then if it is feasible for you I would do it. The problem is that there is no real equity in the property. What about the security deposits and last months rent from the tenants. Who will be responsible for that? If you figure that into the equation you will be paying more for the property? I don’t know but this sounds more like a short sale to me then a take over and keep deal.
I hope this helps.
JOhnP SFL
Bat those big beautiful eyelashes - Posted by Shawn J. Dostie
Posted by Shawn J. Dostie on March 18, 2003 at 13:12:36:
and ask them, Folks, I really love this place and want to do the best i can for you but my partner is the cheapest sum gum in the entire universe. What will it take to do business now?!?! Put the ball in their court and if terms are acceptable, tie it up right then. Don’t let them shop you around.
Good Luck,
Shawn(OH)
Re: Would you do this Sub-2 Deal? - Posted by js-Indianapolis
Posted by js-Indianapolis on March 17, 2003 at 22:16:45:
$6800 cash out of pocket
divided by $228 a month cashflow
Equals 30 months to break even on initial investment.
That is, without any other considerations, such as vacancy, other liens the owners “forgot” about, etc. I’m sure you know that you should search title, and get insurance.
As it stands, you’d be getting in for $74,800 ($68,000 + 3,800 + 3,000). If the 80K is correct, that’s only $5,200 in equity (6.5%). Just enough to cover an agent’s commision, and break even if you needed to sell it.
Conversely, that also doesn’t take into account $12K in equity, possible appreciation, etc. I would think a duplex renting for $900 a month would be worth a little more than $80K. Around here it would be anyway.
I would think this one is up to you, as in what you want. You want to be a landlord? You want to try to flip it? Looks like there’s a little something in it, either way. Emphisis on little.
If it were me? nah, I’d save that $6800 for something with a little quicker and better return. Then again, the thought of being a landlord drives my opinion. I was a renter once, and wouldn’t like me if I were a landlord.
Best of luck to you. Let us know how it goes.
Re: Would you do this Sub-2 Deal? - Posted by Joe
Posted by Joe on March 17, 2003 at 22:08:25:
For me, there’s not enough equity to give the sellers any walking money. You’re paying $7000 cash, and taking over a $68,000 mortgage, paying $75,000 for an $80,000 house. In other words, you’re paying $7800 to get $5,000 in equity.
Even though it cash flows at $225/mo befor eexpenses, you can’t get your $7800 back out for 35 months if you keep it as a rental, and that assumes no maintenance or holding costs for that period.
If you took it over and sold it after the lease expires, instead of keeping it, you’d have holding and marketing costs to come up with that would quickly eat up your $5K profit.
These people are lucky to get out from under it at all. Offer them $500 and your love and admiration, and see if they’ll deal. Even then it’s borderline skinny, but at least you’ll only have $500 into it.
Re: Bat those big beautiful eyelashes - Posted by Kristine-CA
Posted by Kristine-CA on March 18, 2003 at 13:23:19:
Shawn, Shawn, Shawn: haven’t you read enough of my posts to know that I won’t be making up any partner stories? I’m AM the cheapest sum gum–and I don’t think my eyelashes are going to make up for it. (But I could be wrong–you just never know where people are coming from and what they’ll respond to.)
Point well taken about tying it up. Thanks for your input. Sincerely, Kristine
Re: Would you do this Sub-2 Deal? - Posted by Kristine-CA
Posted by Kristine-CA on March 17, 2003 at 22:25:57:
I’m still a renter and would LOVE me if I were a landlord. Let-me-take-care-of-every-little-thing-even-though-it’s-your-property as a renter translates to let me take care of every little thing and don’t you worry about the rent as a landlord. Recipe for disaster, I know. I’d also love to have me as a mother, friend and lover, but that’s another story.
You are right about the value. It’s worth more than 80K–more like 90K. I’m purposely working with a low number in order to figure out the pitfalls.
Thanks for your input. Sincerely, Kristine
Re: Would you do this Sub-2 Deal? - Posted by Kristine-CA
Posted by Kristine-CA on March 17, 2003 at 22:18:40:
Joe: all good points. Except I know these people don’t want my love and admiration. They just want more than the other guy offered them.
Thanks for your thoughts.
Sincerely, Kristine
Re: I wish we could edit our posts - Posted by Joe
Posted by Joe on March 17, 2003 at 22:16:52:
For some reason I got an extra $1000 in my calculations. Hope I didn’t confuse you. Here’s the edited post. (I wish we could edit our posts on this board)
For me, there’s not enough equity to give the sellers any walking money. You’re paying $6800 cash, and taking over a $68,000 mortgage, paying about $75,000 for an $80,000 house. In other words, you’re paying $6800 to get $5,000 in equity.
Even though it cash flows at $225/mo before expenses, you can’t get your $6800 back out for 30 months if you keep it as a rental, and that assumes no maintenance or holding costs for that period.
If you took it over and sold it after the lease expires, instead of keeping it, you’d have holding and marketing costs to come up with that would quickly eat up your $5K profit.
These people are lucky to get out from under it at all. Offer them $500 and your love and admiration, and see if they’ll deal. Even then it’s borderline skinny, but at least you’ll only have $500 into it.
Re: Bat those big beautiful eyelashes - Posted by Heather -Tx
Posted by Heather -Tx on March 18, 2003 at 21:04:56:
I use the “Partner” Alot, haven’t used the eyelashes yet, but there is always a first time ! LOL And if I thought they would get me the deal ? Heck yea =)
Heather-Tx
PS Not with my hubby around… he might get jealous HAH
Another idea - Posted by ken in sc
Posted by ken in sc on March 18, 2003 at 07:24:44:
How about paying them another way. One idea is to pay them $3000 (or I would say $1500) when you sell the property. Or, if you are going to rent for a few years, you could pay them $100/month for the next year. Many people in this situation could use an extra $100/month and that is a lot better for you than stroking a check for the whole amount now. If you do your paperwork right, you can even pay them $100/month if you sell immediately to another party.
Just some thoughts.
Ken
Re: Would you do this Sub-2 Deal? - Posted by Joe
Posted by Joe on March 17, 2003 at 22:27:09:
LOL
Just a note about competition. I pride myself on the fact that many times I take deals like this right out of my competitions hands. Not the deals, really, but the sellers. I’ve offered less than my competion many times, and still gotten the deal.
I bend over backwards to treat my sellers with compassion and intelligence. I’m not bragging, but I’ve learned that by connecting with your sellers, you can overcome many obstacles (such as Jim Investor already offered them the same deal, or more).
Years ago I wouldn’t have known this to be true. But now, when those like Joe Kaiser tell new people to get face to face with the the seller and connect with them, I understand exactly what he means.
Don’t think you’ve got to blow the other investor’s offer out of the water with bug bucks to get this deal. Get on their level and be truthful, direct, and positive, and walk away with their deed. They need your help.
Re: Another idea - Posted by Kristine-CA
Posted by Kristine-CA on March 18, 2003 at 16:13:57:
Ken: thanks for your ideas here. This is one angle I hadn’t thought of but I think the owners would go for. One problem is their idea that they have 20K in equity because of an appraisal they got (I asssume as part of the divorce proceedings). But given the arrears and the condition/neighborhood of the properties, that appraisal is messing with their heads.
I’m sorry that I won’t get a chance to see you again at the conference this year. Next year for sure.
Sincerely, Kristine
Re: Would you do this Sub-2 Deal? - Posted by IB (NJ)
Posted by IB (NJ) on March 18, 2003 at 09:29:34:
Your comments about connecting with the seller are VERY true. I have a closing today where the seller is signing over his deed for $300 up front. He has my word that I’m giving him $8k this Friday (once the zoning conf. letter comes in confirming that my plans for the property are realistic). Over the last 2 weeks, I’ve really connected with the guy. He totally trusts me.
“bug bucks”? Hmmmm. - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on March 17, 2003 at 23:52:14:
Joe----------
Thanks for the compassion in your response. Also for the laugh.
Good InvestingRon Starr*****