Posted in diaries, but figured it'd be seen more here? In any event....:
Ok, story time :o)
So I have been waiting and looking for another property for a while now, and kinda depressed on banks in my town not willing to refinance/etc to use that $ for rentals/flips (I have great credit and make great $ self employed, own 3 other properties, never late, etc) since I want to put it in my llc's name and not mine? I honestly don't really understand why not, but whatever.
So I have been just collecting rent from one property and had about 7k save up from last ~ 10-12 months. I was unsure if I wanted more of a section 8 house and just buy outright or something more substantial and use that $ as a DP.
My mentor and I would go driving for dollars, chat, etc and I'd try to soak up as much as possible.
So last month, I attended my first property auction. There was ONE, vacant, big house that we were pretty interested in out of maybe 28? It was in a neighborhood and in 95% perfect condition (we might have gotten in the house through an open door). Landscaping and carpet were prob only things. It was on the auction site, and bidding was set to start at 160k. Myself and my mentor were going to split it. We figured it was worth ARV of $290-310k and landscaping/repairs of maybe 10-20k, so pretty excited :o)
He knew the auction lady and she told him they were going to bid in for the bank at ~$250 so we were out and saw another guy pick it up for maybe 5k over that.
Fast forward to last week. I am digging through the paper and reviewing foreclosures. I find maybe 6 that are worth while. Go up to courthouse today and see another auction lady and she says 2 of her's were canceled and the other is pending and she can't sell.
I wait around to see when the other folks will get here and learn that they can show anytime between 10am and 4.. Crap lol! I thought everyone showed at the same time, but nope.
So I go home and start calling the #'s in paper to try to see what their reserve is/what time they plan on arriving and ALL BUT ONE are canceled!! Crazy!
So that attorney, who I actually kind of know, is getting there at ~ 1pm and the reserve is $7850. Tax assessor has it listed as value of 33k, but it is NOT worth that. This is a section 8 level house. Not the worst, but maybe a C neighborhood. My mentor and I have been calling each other back and forth and getting a feel for situation.
There is $383 prop tax outstanding since 2014, this is 1st, etc...
So my mentor suggests I go to the house and see what is looks like closer up/see if folks who live there are home/will talk/ etc.
So I do it lol! Kinda scary, but ok. As I pull up, another guy pulls up facing me. I don't know if another investor/owner/etc? I get out and nicely ask if he is the owner. He say no, his mama is. So long story short, he invites me in, his mama (89 years old) yells at him about all kinds of stuff lol, etc, etc. They don't blame me for buying it (this is before actual auction), but just kinda upset at situation and blaming each other for it happening.
I find out that roof, a lot of plumbing and a small addition have been done about 2 years ago. Goooooood! I find out that they got a "loan" for the construction/fixes for 16k and used house as collateral. The son, says he paid about half and then couldn't pay anymore. (16k - 8k is about the $7850 the bank is asking so makes sense). I ask how much they were paying and he says $250 a month.
I am thinking I need more than that (even though my figures say I'd still cash flow at that!)
So I go back and forth and just say well, it'd be easier to keep ya'll since all your stuff is already in here, but would need more than that.
* I leave for auction.
Guy comes to auction to get my # and tries to talk to attorney to see if he can pay the lump sum owed this week using his brother's money (supposedly. could be a stall technique?) But attorney says it's out of his hands now.
I learn that there is a FIFA on the house/lady and it MIGHT transfer with me buying it. The attorney can't say for sure. We go back and forth with him and my mentor and calling different folks, etc. Can't get a def answer since the fifa was before the mortgage?
In any event we calculate worst case, 12% interest, etc and come up with ~ $2600. Plus the ~ $400 prop tax is about $4k added to price worst case. We figure it is still worth it, but 12k total is cutting it close.
So we are the only ones there/no competition. And the auction starts.
Blah, blah, bidding starts at $7850. And we bid $7851. He says on behalf of bank.... it bids $9100. Yuck! So we say we are out, and prepare to go. I have seen the attorney earlier, keep going to a car and talking to the 2 guys in it. I originally thought it was another investor, etc, but he says it is the guy with the lien from construction!
So we ask if he'd take less?
So attorney goes over and asks/etc and comes back with a figure of $8500. Still a bit high for us, so for the heck of it, my mentor asks if he'd take 7k (happens to have a 4k and 3k cashiers check from hunting earlier this morn. I would pay him back since all I brought was regular check book. SIlly me again lol!). He goes to car again and SCORE, says they will accept 7k!!
So we start going over paperwork and see that my mentor has to go to bank afterwards and it is same back that we use. The attorney is right next door to, so I just withdraw 7k at bank and pay cash so I don't have to owe my mentor.
My thoughts are either to:
1. Offer to sell house for 12k to son/mom if they can use their brother's $. It'll wash my hands of drama and make a quick $
2. Offer to keep them in the home at $400 a month (but iffy on if they can afford)
3. Evict. *Fix. Re-rent @ $400
What are your thoughts?!
* I didn't get a real good look at home inside, because guy was huge and in way going to see mom in bedroom, but didn't get a horrible vibe about inside condition. Some walls are stucco so need patching where has came off, flooring put down in addition (still plywood on floor), etc.
Thanks for reading my long story! :O)
