Amazing Opportunity - How Do I Take Advantage?

Question

A condo in my neighborhood was recently brought to my attention, and it appears to be a steal. The neighborhood is probably a C+ neighborhood, but the tenants in this building seem pretty decent from what I've been told. The unit is in foreclosure and is REO. It is 2 bed, 1.5 bath, 1075 sq. ft.

Here are the numbers:Asking price: $39,500HOA: $135-150 (Can't find the exact number)Monthly rent: $1,000-1,200My problem? Of course, financing. I currently have little in savings and I'm not sure my debt to income ratio would allow another major purchase, as I own a duplex as well (owner occupied purchased with an FHA).

Should I give the bank a call? Not sure how to get this all together. I have $12K in equity in my current house, but have only owned since Dec. 2014.

Thoughts?

Cosmo Iannopollo · Answer

Alex R., thanks for the reply. I'm not sure about the partnering aspect. One thing I'll need to get over is approaching people for money. I'm still not completely sure how to structure a deal with family/friends, and I have none who do this actively so I can't rely on them either. Makes it tough.

But good call on having the paperwork ready if necessary. To my great satisfaction, I believe I have all of that within arm's reach.

Chase Gochnauer · Answer

The good ones here don't last long after the OO period expires. I've had good luck with smaller banks and credit unions.

Cosmo Iannopollo · Answer

@Chase Gochnauer this was pointed out to me by a guy who was actually clearing it out for the bank. He's an experienced contractor and recommended it to another guy. For all I know, that guy is buying it, haha. He knows the area very well and had nothing but great things to say about it. When I asked why he wasn't buying it, he said he was all tied up at the moment on another property or he would.

Did a comp search and it appears that other units in this building went for anywhere from $55-60K. This particular unit sold in 2006 for over $120K, though I don't rely on that crazy time for anything other than giggles.

And yes, you're right about the REO offer period, but that expired yesterday. This baby is open for business!

Chase Gochnauer · Answer

Sounds very good on the surface, but I'd be concerned there's a lot of deferred maintenance. Do a comp search on Zillow to see what other units have sold for. That's great rent for something that cheap, so either it's a fantastic deal or something that you're missing.

Other thing, is that some REOs only allow owner occupant offers for the first week or so, so you may want to check into that.

Cosmo Iannopollo · Answer

A little more info from my realtor:

Property was assessed at $59K (selling for $39K).

Taxes are only $2,478.

Ricardo R. · Answer

Cosmo, you never know until you ask. You need double check that your numbers workout and if they still do, you need to move fast, like now. Sure you can start by calling your bank, but I would probably go to loan a broker first, try to hone in on a portfolio lender, just ask them... they will have a bit more flexibility and options for you if its possible. Also, don't forget the credit unions. If this can not be financed and only if it can not be financed as a rental property, can you purchase it as a primary residence meaning you would have live in it  for a year or so, could you rent the home you're currently living now for that time period? -------- If you cant do this, can you 'partner' up with possibly a family member that can lend you the down payment in return for a fee? -- Have all your stuff lined up and ready to turn in as that loan broker asks for it (2 years of tax records, 2 months of pay stubs, W-2's or 1099's for the past 2 years, 2 months of statements from your biggest bank accounts, etc. -- be ready to go).

Hope this helps.

Alex