All Forum Posts by: Sheree H.

Thanks Raymond B., Glenn Espinosa, and Gordon T.! Turns out there's an Atlanta REIA meeting Monday night; maybe I'll see you there Gordon.

Sheree in Atlanta

Thanks for your advice Mike. Good point on doing House 2 first to be more in control of the funds and transaction. Which gives me the idea that I may be able to even delay the subject-to purchase of House 1 until House 2 is finished, if we decide to go ahead with this.

I estimated very conservatively. The owner thinks House 1 will sell for 120 and House 2 for 170, but he didn't do any comps.

I walked through the houses today. Not quite hoarder condition, but getting there.

I'm getting nervous about taking on this project. You're right, the numbers don't add up unless I estimate high ARV, and I haven't calculated asbestos/lead into the rehab yet. I'm starting to feel like the best thing to do is sell the houses as-is.

Do any Georgia rehabbers have a recommendation for an asbestos removal and abatement company?

Thanks,
Sheree in Atlanta

Oh my gosh!!
Thanks Stephen.
Off I go to research asbestos.

Cheers,
Sheree in Atlanta

Correction to House 1: Loan of 100k.

88K at surface value feels like I'm ripping them off. But with all the rehab, I almost feel like I would only be breaking even on House 1.

Also, a thought occurred to me: would the property value be higher as one lot versus two?

Looking forward to hearing what you all think about this.

Thanks,
Sheree in Atlanta

A direct relative has two houses they're willing to sell me to wet my feet on. They are not investors; because of family situations, they ended up owning two houses, and now they're looking to move to another home that their son owns.

Since I'm new to this, I'm pretty sure my ARV and rehab costs aren't going to be dead on, but I took comps from within the last 6 months, and I've been reading through J Scott's rehab spreadsheets since he's in GA and our house prices are in the same range.

House 1: Split level 3bd/2ba, wood exterior, built in 1977. Loan of 150k with no other encumberances.
ARV 90
Rehab ~50k? Old wood paneling. The windows are those long rectangular un-openable kinds; should we change them? Basement pump floods occasionally. Bathrooms will need full remodeling. Needs gutters. Everything needs updating.
Using JScott's formula, MPP=8k (!!)

House 2: Brick ranch 3bd/2ba, built in 1975, full finished basement with another 3bd/2ba. House is paid off.
ARV 150k
Rehab 30K. Needs gutters. 2 bathrooms and 1 shower need re-tiling. Everything needs updating.
MPP=80K

The two houses are back to back. House A on a busier street, House B in a quiet established neighborhood. House A is right down the street from a top elementary school, feeding into a top high school. They are not open to selling only one. I am considering buying House 1 subject-to. Fixing and selling House 1 is priority b/c of the subject-to; I'm still considering whether to sell or rent House 2.

Does 88K sound like the right price? Are there legal hurdles to selling two houses in one transaction to a relative?

A giant Thank You and all credits to J Scott!!

I enjoyed your article. It's eye-opening to me how important base hits are, in gaining experience, establishing relationships, and building a reputation. Your quote below gave me an "aha!" moment:
"Even though I had none of my own money in this deal, I cannot overemphasize that this financing structure is only possible with experience, relationships, and a track record (remember all of those base hits you are using as building blocks?)."

Thanks for your story. Gives me a good goal to aim for!

Sheree in Atlanta

Ok forget everything I said before. I've been reading J Scott's articles and I'm going to use his formula of MPP = Sales Price – Fixed Costs – Desired Profit – Rehab Costs. While targeting distressed owners and buying subject-to.

I still don't understand how equity fits into any of this. Can someone explain why equity is so important?

And again, will a RE attorney take care of all title needs?

Well, I was all ready to start calling and had a goal of starting a deal by the end of this month, before I found BP. The more I read, the more I realize I don't know what I'm doing, and at this rate, that first deal is not going to happen anytime soon! *frustrated*

Another site I use is schooldigger.com. Also second Greg's suggestion for using city-data.com for a good place to ask for subjective opinions and personal experiences.

Thank you, Fran! I appreciate your clearing me up about equity. I thought it was what he's paid on his mortgage.

I'm using a website, Foreclosures.com, that actually does give me a number for equity that I think is based on the mortgage balance. It has a disclaimer that it's based on the primary mortgage and it would be inaccurate if there are other loans on the property. I check the property and owner records for that.

So the formula I'm using: ARV * .65 - repairs = offer price. Offer price - back payments/fees - loans = what owner gets.

Is this not feasible with a distressed owner? What is a good formula to base offers on? And how does equity figure into it?

I'm super new at RE and have to look up almost every single acronym you guys use, so please bear with me if my questions are mind-numbingly basic. I searched and read about equity, subject-to, and attorney, I have about a million tabs open, and I still don't understand!

First, I don't understand how equity fits into forming an offer, specifically using this formula I got from a "guru" for buying/rehab/selling subject-to:
Property MUST HAVE at least 30% equity. Then, ARV * .65 - repairs = offer price. Offer price - back payments/fees - loans = what owner gets.

What is the purpose of having at least 30% equity? Does it make a difference that the "guru" lives in SoCal, while I'm in GA?

Also, what is wrong with my math? I'm obviously not seeing something here.
An example property I'm researching:
ARV = 200,000 (low estimate, comps selling 202k-212k)
Equity = 60,100
So my offer = 200,000 * .65 - 30,000 (low estimate at $10/sq ft) = 100,000 ??
If I understand correctly, he still owes 140,000 on his property, and my offer of 100,000 is waaaay lower than his loan. This won't even cover his loan, much less his back payments, and basically he's going to have to pay me to buy his property. I am very confused.

Finally, to do a subject-to/rehab/resell, do I need both a RE attorney and a title company, or is one enough? I'm going to contact an attorney to walk me through steps / contract papers, and his website mentions doing title insurance, title searches, and reviewing title reports, etc, so why would I need to look for a title company also?

Thank you so much!
Sheree in Atlanta