Let's get creative - Deal Brainstorming

[Quentin Johnson]

I was approached about getting in on a deal for a condo in Dallas County. The condo had an electrical fire about a year ago and the owner has been making mortgage payments and rent at their new place during that time. They just want to be done with the property but the rehab isn't complete. The condo association has funds for the owner to complete the rehab and the owner has to option to request draws or take the money and control the rehab themselves. 

The problem I'm trying to solve for is coming up with a few offers that the owner can choose from.  

Here are the numbers: 

- 2 bed/3 bath townhome

- $155,000 left on mortgage with $1200/mo payments. 

- $500 HOA fee monthly

- $230,000 Sell price

- The $75,000 spread is the owners equity that is proposed to be amortized over 2 years. $3100 mo

- Assumable VA loan.

- Market rents: $1900-$2100

- Sell Comps: $230,000

Situation: 

I don't have the cash to service the debt while repairs are being done. 

Owners pitch: Owner carries the note until rehab is done. Uses HOA rehab funds. I'm responsible for paying mortgage until he completes rehab. Then I assume loan, and find renters or move in.

Problem: 

Equity payments make it not worth the hassle. No equity left in the deal. No room to save for reserves. 

I have a couple of ideas on how to approach the seller but I want to get your juices flowing and see what other creative ideas ya'll can come up with. 

[Bruce Lynn]

Stay away from this.  It's not a deal.  Condos will eat you alive.

Is it warrantable? If not it will be hard to finance for your end buyer. Lenders will be limited and it will require more down payment like 20% when they should attract 1st time buyers. Also with a cheap VA loan, how do you bridge the gap? Almost no one will do 2nds on those...so you got this huge gap between the balance and ARV....who funds that?

Investors typically don't want these.

Not sure about this specific situation, but typically on condos you own the sheetrock in.  So exactly what rehab will condo cover?  100% or just about 1/2 and the cheap 1/2.  You typically get to do cabinets, paint, floors, etc?

Does the condo allow more renters?  Many have a limit on how many can get rented due to that warrantable issue.

Another issue are the HOA dues....are they requiring them be paid? Is owner current? Who funds that during your rehab and sale?

Any lawsuits going on with that fire or any other issues?  That can also make financing tough.