All Forum Posts by: Ryan Hebert

All,

Here are the details:

My friend has an empty house. She moved out two years ago, leaving her significant other in the property. The roof leaked and was not addressed over that time, leaving a mess of some of the interior.

Today, nobody lives there and she wants out. She is still making the mortgage payment, but is not able to rent it out due to the damage. Here's where I come in. She divulged this info at our monthly poker game... it just fell in my lap.

Data:

1700sf

3 Bedroom, 1 & 1/2 Baths, w/  bonus office space

1 car garage (typical for neighborhood)

Comparable properties in neighborhood sell between $150-160k

• Estimated damage (moisture and general damage) with a contractor at $45k (yeah, nothing to sneeze at; new roof membrane, hvac and ducts (ducts on roof on old NM house), gyp bd work, mold abatement, all new flooring, interior doors, etc.
• New work would include redoing the kitchen (simple and small, maybe $10k)
• Upgrade electrical service so we can upgrade the AC ($1.5k)
• Spruce up landscaping front and back $5k
• Small contingency of $4.5k for misc.
• I feel pretty good about $65k as a healthy flip budget

So, she owes $98,000

We think it only makes sense to go into this if we can get it for $60,000 max (begin negotiations at $50,000).

Purchase + flip = $125,000

Potential sale on low side of $150,000

Potential Profit on low side: $25,000 - carrying costs

So, the real meat of the question (other than feedback on my flip numbers) is what to do about getting the property for its current worth. If she's not in default, how do we approach the bank with our offer (considering it's much less than is owed, but is self-evident as a fair offer if they saw the damage)? 

I've got a partner in on this (real estate agent/broker), but he hasn't dealt with this specific situation yet in his career (about 6 years).

Thoughts?

Much appreciated,

Ryan Hebert

@Ryan Dossey

That makes sense. 

I refinanced my primary into a 15yr last year before I had thought about investment properties. The rent would not quite cover the mortgage... needing $300 +/- each month if I rented it out. I suppose I could go right back out and put it into a 30 again... eh.

@Jerry Padilla

That's what we ended up talking about. He didn't think it was such a great idea to owner-occupy, with the kid and all; I tried not to show all my cards and the amount of enthusiasm I've got to get this rolling, so I didn't rant about going the FHA route, and only living there for a couple years at max.

What about seller financing a portion of it. Is that possible? Have a bank finance some and the seller the remaining?

So, I took a leap and contacted the seller of a 4 plex personally. I contacted him for a couple reasons, first was actually to get to know more about him; It turns out he's living the life that I see myself in a few years (an architect buying, building, selling, holding...). Second, I wanted to get info on one of his properties for sale. Well, that was a great lunch we had. I got to hear his story and philosophy on investing and design.... on life. I think we've got a lot in common, we'll be meeting for beers on a couple weeks. 

I thank this site for giving me the confidence to get out there and meet folks.

Thank you Caroline! I took two classes in grad school; Architect as Developer and Urban Real Estate Development. Those two classes are what made me think that this is all possible. I will definitely check out that site! Thanks again.

All,

Well, I had an excellent discussion with my wife this weekend. She continues to surprise me and reaffirm the reasons we're married. 

I have been mulling over different strategies for shoring-up our retirement plan over the past few years. We made a bit of money on the latest equity market upswing (like everybody else) and was content to do that ad infinitum. Geez, even the flier I took on BitCoin turned up roses. However, the RE bug kept popping up and showing me all the other possibilities out there. Long story short, I've come to the conclusion that it might make a lot of sense for my wife and I to sell our current home and purchase an owner occupied multi unit property. I shared this with my wife and she was extremely supportive and much more interested in the idea than I thought she'd be. So... I'm that much more motivated to get this ball rolling. I think this could be a house hack that we repeat a couple of times using the FHA loan system and then branch out into other RE investments.

The issue though (there is always one) is that our house is worth about $205k and we owe $170k... the fees to sell will eat away a chunk of that if we even get asking price. Maybe walk away from the sale with around $12k? I know I'm just getting myself tripped up in the sunk costs and mental block of previous investment, but it's causing me a little anxiety. I guess I just need affirmation that what I'm proposing makes at least a little sense.

We have a couple housing options for the time between selling our home and buying a multi unit property... lots of family with rooms to spare here in ABQ. :) So we have the ability to be a little picky when making our big move. We want to be picky for the financial due diligence reasons, but also because we want a property we'd feel safe raising our son in (he's still an infant).

Thoughts? Cautionary tales? Better ideas? 

Much appreciated!

Ryan

Howdy all,

I'm an intern architect (starting the ARE tests this month) that is interested in RE development and investment. I'd like to get myself into a position to allow my wife to stay at home with our son and any future children and work when she wants (she's a licensed architect). I'd like to be responsible for creating better places for people to live and generally enhance my hometown. Right now I think 2/3/5 plexes look most interesting to me, but I'm open to having my opinion changed and horizon expanded.