FIRST DEAL...WHAT YOU GUYS THINK?

[Lee V]

Alright guys....

I got a REO that the banks wants 67k. They will not go lower. It was originally listed at 79k. The home in itself probably needs about 7k of work to bring it to brand new, quick sale condition (it already has new baths and carpet). To used it as a rental, you'll probably just need new appliances and paint.

The problem with me accepting this offer is: pulling comps from the last 6 months, most homes were selling for 62k.

I counter at 62k with the comps but the bank rejects sticking to 67k (they said it had something to do with a reverse mortgage...blah blah blah).

Even at 67k, the house seems to be a pretty good cash flow.

Here are my numbers:

HML for $53,600 (found an HML who said they will be willing to lend at 80-90% of loan amount)
Payment is interest only for 1 year, loan due at 1 year.
I estimated the payment will be somewhere around $536


Rent will be at $1100
-$536 HML payment
-$150 tax and insurance (estimate)
-$200 per month to put in reserve incase of vacancy etc.
Positive cash flow: $214.

Am I missing something? My exit strategies are to refi at the end of the HML loan into a 30 fix mortgage or sell if the right opportunity comes.

The current AS-IS value should be around 75k. ARV values, including new kitchen, cosmetic work, and landscape, should be easily appraised at 90-100k.

What do you guys think? Should I be worry because of th recent sold comps in the areas are low? The market here in Stockton is pretty bad, but I believe now is the time to BUY AND HOLD.