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Updated almost 9 years ago on . Most recent reply

User Stats

32
Posts
6
Votes
Elizabeth Matos
  • Real Estate Agent
  • Menifee, CA
6
Votes |
32
Posts

Is this really a deal or not?

Elizabeth Matos
  • Real Estate Agent
  • Menifee, CA
Posted

I am a hesitant newbie from california and boy am I scary to loose my ***. Need some help here.   I found a property in Menifee Ca. It has several advantages. It is very close to the contractor I am working with and in a nice neighborhood. The home has been vacant for 7 years and now it is a short sale. The asking price is 220,00 It's a 2bd/2bath with 1255 sq. ft. I offered 187,000 and yes I know that is more than the 70% rule but I feel I continuely get out bid because I am bidding too low and then don't get another chance. although the residence is missing an air conditioner and furnace, the property is in very good shape. The Landscaping needs a total revamp. As does exterior paint and facia.

The loan I have gotten approval on bothers me a bit. It is for 200,000 with 25% down for 3 0r 5 years with 10.99-11.25 interest rate. Yikes. So I come in with 50,000, the mortgage would be 1450 and I pay 4-6 points. Now if I don't want a prepayment penalty then I can buy that by paying 1 more point. I hope I am presenting this correctly. Somehow this does not seem like a great deal. but what if it's all I can get?

Most Popular Reply

User Stats

275
Posts
270
Votes
Andrew Holmes
  • Rental Property Investor
  • Chicago, IL
270
Votes |
275
Posts
Andrew Holmes
  • Rental Property Investor
  • Chicago, IL
Replied

Ms. Elizabeth: 

Just a suggestion please absolutely do not do this loan. The point and rates are hard money rates it's a very bad rate for you. 

The type of loan you should be looking for is a HomeStyle Renovation Loan your rates will be 5 - 6% and may be 1-2 % closing costs that is it. The numbers you are looking at will be very tough do do unless you have a huge margin and it's a flip.

Another place to look for money is private money lenders. Friends or family or other investors that will lend you money at 10 - 13% fixed rate secured with a mortgage and  note. 

Here are few thoughts. 

1. What is the reason you want to invest? (Short Term Or Long Term)

2. What is the goal Flip or Cash Flow?

3. If it's a flip then how much is this property worth once you have it rehabbed? How much is your all in cost including hold cost and cost of money?

Based on the just the numbers you posted it's not a good deal.

It's great that you putting so much effort in making offer but remember that don't do a deal just to do a deal. It needs to make sense for you. It's great that you have the foresight to post some of the details before you got in the deal. 

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