HELP! Foreclosure Bid Process and we've got a SQUATTER!

[Matt Hudson]

A realtor sent me a foreclosure listing today that within 7 hours had 6 written offers. This is not surprising as Nashville is a hot market. I like the way the numbers are looking and am ready to make an offer. I'm hesitant for a couple of reasons. 1.) It will be outside of the budget I had originally planned on spending and 2.) there is a squatter. I need advice on whether I should go over budget and what the hell to do about the squatter.

Below are some of the numbers from the BRRR calculator. I have about $210k in a HELOC that I am willing to spend on a property. They are asking $145k for a 3/2 and 1/1 duplex in Nashville. It will sell for more than that. The numbers below are at my budget. I am also fortunate to have $80k+ in savings that I could put forward but had no intention to do so. Seeing the numbers below do you go over budget on the asking price? If so, how much?

• -Purchase Price: $155k
  • >This is $10k over asking but it will likely go for much more.
• -Estimated Repairs: $55k
  • >Based on 2 quotes. No walk through because of squatter. Unknown condition of large cap ex. HAVC, plumbing, etc...
• -Total Project Cost: $210k
  • >This is at my max budget. Any increase in asking price or rehab will come out of savings. 
• -After Repair Value: $323,400
  • >Based on a very conservative $175/sqft. Agent and myself came up with $200/sqft comps.
• -Loan Amount: $258,720
  • >80% LTV no seasoning. At this price we'd walk away with $48,720 in our pocket. This is also the break even point.
• -Monthly Income: $2,400
  • >Again conservative estimate and could be upwards of $2,750/mo.
• -Monthly Cashflow: $457.72
  • >Includes property management at 10% but does not include vacancy, repairs, cap ex estimates.

Now what to do about a squatter who is living in the back sunroom/screened in deck. My agent, contractor and myself are going to make an appearance at the house. There are no showings because the bank does not want the liability. Hopefully we'll be able to gather more intel on the true condition of the house and squatter sitch. Wish us luck and this may be my last post. Just kidding! I've read that, "There are no “squatters rights” in Tennessee, but there is adverse possession." which is 7 years. My RE lawyer says you'll have to serve him a eviction which takes around 60 days. I have it in the budget to pay him to leave and also have a particular set of skills to be very convincing if need be. HA! Anyone have experience with this?!

[Anthony Dooley]

You already pre-paid your cap-ex with the $55,000 in repairs. ARV doesn't really matter unless you are going to sell. As a rental, it's decent, but you would get a higher ROI in a lower priced property. The squatter can be chased away with the correct amount of deterrent. I won't go into it, but there are ways to make people want to leave.