All Forum Posts by: Marvin McTaw

@Cesar Saenz I use quick estimates in my initial filter of properties to determine whether a property warrants additional attention. It's sort of like an initial filter. If you're doing a quick and dirty estimate, you should also adjust based on the condition. Attach a higher multiplier for houses that need more work. You also have to adjust for the type of house you're doing. There is a definite difference between a luxury house and a place you're going to turn into a rental. If you're wholesaling/flipping a house, you don't need an exact estimate. If you're going to be rehabbing the house, you should definitely get a contractor's estimate and in many cases a couple of them just in case. 

Based on your current situation, you should figure out whether or not you want to do all the work yourself or find someone else to do it, take a loss and move forward. In essence you need to figure out if its worth to spend more of your time on this place or find another deal to make it up on. Best of luck. 

 re: Divorce and ex-wife messing it up, thanks for the heads up. The divorce was roughly a decade ago but I will request the divorce decree as well. I honestly think I'm overthinking it at this point and just need to lock it up under an option agreement with the broad terms he will accept. Worst case scenario is nothing happens. I'm unable to find a buyer of any kind and he does deed in lieu of foreclosure. Best case scenario, I find a buyer or tenant buyer and make money on an assignment or lease option fee. 

 re: Second Mortgage, I have no idea. I've asked him to get me the latest statements so I can look them over. The situation has changed from when we initially started talking last year. I was planning on lease optioning the property so the mortgage wasn't that big of a deal to me. 

Typically in this scenario with late payments and what not, I would try to negotiate a settlement amount with the second mortgage to make a better deal. I've done it once before and it worked out pretty well. That being said though, there is a good amount of equity in the house already and he's only not paid a few months so I don't know how willing the lender will be to settle right now.

 Desi I definitely understand what you mean. I primarily wholesale and lease option properties. I think what you're saying has merit. The thing I should mention is that the house is livable now. It just doesn't have the updates that typical retail buyers in this price range expect when they purchase. In any scenario, I plan to aggressively market the property to find a buyer. I definitely appreciate the advice!

Hi Dave and thanks for your feedback. In regards to the deal, I'm trying to solve a problem for the owner and but also make business sense for me. The mortgage balances are what they are and the banks aren't willing to negotiate yet. There are actually two mortgages in place: a primary and a secondary. The primary is at roughly $250,000 and the second is at $270,000. The loans aren't non-performing (yet) and they are floating rate loans currently at roughly 3.0%. They are 7 year ARM tied to 6 month LIBOR. The owner can't refinance right now either so that's out of the question.

The ARV is based on sold homes within a quarter mile radius, in the same sub-division, of similar size, build, age (all built in 1993), lot size, and style including a house two doors down that sold for $635,000 three months ago. In total, there are four comps I'm looking at. I also look at the active and pending listings as well in order to gauge what people think they can sell for and to assess the competition.

In regards to margin, I'm not looking to make the biggest profit. I want to help the owner and have it be worth my time. I typically wholesale or lease option properties making a couple thousand to ten thousand a deal. Given the feedback I've gotten, I don't view it as being that risky if we lease option this property or take it over Subject To. I'm essentially getting the property for no money down and will let the owner occupant or tenant buyer deal with the repairs. As of right now, I'm not going to execute the A to B portion of the deal until I have the B to C funds in place whether through a lease option fee or down payment on owner financing. 

Any additional thoughts given this information?

The complicating factor for this deal is that the owner's ex-wife is on the mortgage but not the title. Due to his failed listing (been talking to the seller for about 9 months), he only recently said he would be open to these other options. I think buying it Subject To and then selling it via seller finance or lease purchase as-is, is probably the best option at this point. Thanks for the suggestion. 

Hey @Brian Gibbons - I listened to it and like the concept i.e. it allows me a stronger offer than the competition. Although it's not the same, I view it similar to a contract for deed in many ways in that the JV is another form of seller financing. I see the downside being, if you don't sell for ARV or or whatever you think your exit price will be, you could end up with lower profit or no profit at all.

The one question I have is about getting on title. I'm trying to avoid as much of the "upfront" costs as possible. I don't want to have to pay legal closing costs, title insurance, taxes, etc. on the A to B transaction. I don't want to pay anything until the B to C transaction. If I buy it Subject To, it still implies a closing with an attorney (which is required in Georgia). Or am I missing something?

@Brian Gibbons - thanks for the suggestion. A couple questions for you:

• Real Estate Agents: Why are you against doing this FSBO in lieu of using an agent? I can take part of what would be going to them and use it to market the property. Additionally, I can get the property syndicated to a number of online properties the MLS would syndicate it to anyway (e.g. Zillow, Trulia, RedFin, Realtor.com, HotPads, etc.). In Georgia, we have to close with attorneys so I'm not really as concerned about the documentation since my attorneys handle that.
• Why Should I JV?: I'm not facing any competition and the owner just wants to break even and get rid of the mortgage. He's ready to do deed in lieu of foreclosure if he can't sell it. 

@Desi Arnaz - thanks for your suggestion. One thing I should note is that this property is essentially a failed listing. It sits in a nice country club and there have been several sales in the past several months DOM's have been between 30 and 60 days. According to him, the feedback they've received is primarily that the buyers want updated bathrooms and carpet but he doesn't have the money for the updates. 

Also why do you think the profit potential is skinny? What do you think would be "reasonable" for this?

I should also add that the $500,000 includes the amount he is behind. The mortgage balance is actually closer to like $470 or $480K. I'm still waiting on the latest statements from him to get the exact amount.  

Hi @Brian Gibbons. I think that's a little short sighted. I see plenty of ways to make money from this. I can lease option it out (i.e. enter into lease purchase, collect down payment in excess of the $10K behind in payments, and have rent at PITI + HOA). That way I'm not paying for any repairs and making my money on the front end and potentially on the back end as well without realtor commissions by selling to a tenant buyer.

Another option is to simply do FSBO. My team and I can do pretty much everything a realtor can do including getting it listed on the MLS using one of the flat fee services out there like Fizber or ByOwnerMLS. Even if I have to pay a Buyer's Agent, that's still $18,000 saved.