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Updated almost 5 years ago, 12/19/2019
Rental or wholesale Home with high debt and little equity play
Hi i am trying to make this deal work. I am new to this. Here are the numbers
CMA is 234k, seller wants for what is owed. Bank said they want me to meet at minimum net balance of 172k.
Payoff is 207k , Appraisal as is 205k (needs repairs/cosmetic updates)
Repairs - To be determined since utilities are off... am working on getting those figures.
In arrears 14k (10/mo) Needs gone by mid January.
Home has lots of potential and would like to prevent a foreclosure/short-sale.
Is there a way to make this deal work with existing loan? What is a viable entry-exit strategy for this unique situation? Should a loan be issued to cure it and some repairs to then rent out and generate equity?
i need some pointers. Honest answers only please
#2 Land & New Construction Contributor
- Developer
- Charlottesville, VA
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#2 Land & New Construction Contributor
- Developer
- Charlottesville, VA
Originally posted by @Joseph Hernandez:
Hi i am trying to make this deal work. I am new to this. Here are the numbers
CMA is 234k, seller wants for what is owed. Bank said they want me to meet at minimum net balance of 172k.
Payoff is 207k , Appraisal as is 205k (needs repairs/cosmetic updates)
Repairs - To be determined since utilities are off... am working on getting those figures.
In arrears 14k (10/mo) Needs gone by mid January.
Home has lots of potential and would like to prevent a foreclosure/short-sale.
Is there a way to make this deal work with existing loan? What is a viable entry-exit strategy for this unique situation? Should a loan be issued to cure it and some repairs to then rent out and generate equity?
i need some pointers. Honest answers only please
You can do a lease purchase/rent to own/land contract where the owner retains title until you payoff the loan through payments or purchase with a new loan.
You can do a subject to and take title while leaving the loan in place.
Either way you will need to catch up the payments to satisfy the lender.
Make sure to speak to a local real estate attorney regarding the options to make sure you do everything in compliance with state and federal laws.
@Greg Dickerson
Thank you boss
Without knowing what this will rent for, how much the repairs are, and what the local market conditions are (including specific neighborhood conditions, there is literally no way to answer your question.
It does not sound like you will have any equity at purchase without a short sale approval from bank so no option for wholesale and in most cases, buying at retail without equity almost always equates to zero or negative cash flow so no deal for that either.
#4 Wholesaling Contributor
- Wholesaler
- Austin TX
@Joseph Hernandez Sometimes you have to recognize that just because a person wants to sell doesnt mean that its a deal. This really doesnt sound like a deal. Without knowing the terms of the loan I cant even say that a sub 2 is a viable option. I think the biggest difficulty new wholesalers have is they cannot distinguish a deal from a waste of time. In my opinion this one is a waste of time especially if its a foreclosure that you have to get under contract and sold to an investor by Jan 10th. Remember, your value (and wholesale fee) comes from finding opportunities to make money and presenting them to an investor. There is no money here.
@Will Barnard
Thank you for your input
@Lydia T.
I appreciate the insight, thank you for your input.
@Lydia T.
Even if I purchased a home with a CMA for 234k and bank is willing to let go at 172 minimum (I buy cash at 160k) then don't do any renovations/repairs but instead install a tenant willing to do repairs/renovations at their cost and they instead generate equity on top through a lease option to buy,would that be a viable strategy?
@Will Barnard
Can you refer to the reply @lydia. The area is one of the better neighborhoods in the city of Bakersfield where migration is happening
Originally posted by @Joseph Hernandez:
@Lydia T.
Even if I purchased a home with a CMA for 234k and bank is willing to let go at 172 minimum (I buy cash at 160k) then don't do any renovations/repairs but instead install a tenant willing to do repairs/renovations at their cost and they instead generate equity on top through a lease option to buy,would that be a viable strategy?
While Bakersfield has shown a steady increase in Pop growth over the last 5 years (approx 1% according to the Department of Finance), it is mainly due to the fact that they have more affordable housing than most parts of CA and also have a large amount of land available. But you also need to consider incomes, job growth, and other market factors as well which contribute to a decision to buy in one area over another.
As to your main question here, do note that a large amount of time, lease options are not every exercised by the tenant and I can tell you it will be difficult to find a tenant willing to put money into a home prior to them actually owning it. Secondly, doing so could create legal and liability issues for you as well. Plus, what if they do crappy work or mess something up. After all, they are not likely going to be licensed contractors as your tenants.
It appears to me that you are intent on making a deal out of this one deal. Not sure why but know this, there are many more deals to be had out there and trying to "force one" is not likely going to end well for you.