Need investor for second lien
Hello All:
I am new to the investing and am in great need of an investor to bail me out from a possible froeclosuer.
I was in bankruptcy and it was discharged in May 06′ the problem is that when it was discharged the past due became due and the Mtg. company is calling the loan. Our atty did not tell us this would happen I have since sent in around $10K and have deplieted my savings. I do not want to loose my home. I have alot of equity in it and it is being changed to commercial which gives it more value. I have consulted an atty and he advised me to file Bk again I don’t want to do this I really want to pay my debts like we are obligated to do as good citizens.
Thanks
Eloise
ANSWER
Eloise,
Give me a call and I will talk you though a few options.
Yes, a lender will OFTEN foreclose as soon as a property is discharged from a bankruptcy. If you really want BAD advice on what to do with a property that you cannot afford, ask a bankruptcy attorney.
My experience is that bankruptcy attorney’s almost always advise people to declare bankruptcy, as sort of a one-size fits all solution. Most of their clients end up with a bankruptcy AND a foreclosure, when at least 50% of the time neither was necessary to discharge their debt. Most people have no idea until it is too late that a bankruptcy does not prevent a foreclosure – it simply delays it while making it more likely to ultimately occur and less possible to avoid.
Phill
Money partner & subject to deals
I have a friend that would like to work together and
provide the necessary money for any subject to deals I
locate, and we then turn around and sell.
Any suggestions on how we should construct this
arrangement?
Thanks, for any and all assistance.
Barbara
ANSWER
I do these frequently with other investors. Partner find deals, I fund them, we split the profits.
I use a simple Limited Partnership Agreement that we customize for each deal. It defines the responsibilities of each party, what is considered as profit and expense, and how profits/losses are to be divided, etc. It also has other boilerplate needed in limited partnership agreements.
The actual buying and selling is generally done in the name of the person/company funding the deal, or in an LLC created to hold the property (if it will be held for a long time), or in an LP created to flip properties (this is what I use). Most people don’t care who’s name the property is in, they just want their fair share of the profits.
Phill
In need of an investor /lender.
I have several properties in need of funding. A few are set to go on
the steps on Tuesday and I need assistance in the purchase. Looking
for someone to front the purchase and construction cost. ROI 30% in 3-
5 months. We are do all the grunt work. I.e. – locating properties,
negotiate deals, putting teams together, marketing the house, etc. You
just sit back relax and let your money work for you.
ANSWER
I buy/fund lots of properties this way… Give me a call…
Phill
Advice Requested: Multifamily Investment
Appreciate any advice you might have.
I am about to close on my first multifamily property that does not break-even / cash flow, but will, over time, hopefully appreciate in value and break-even on a monthly basis. I am putting 10% down, with 5% in capital up front for renovations. The monthly carrying cost is ~ $2,900 on a fixed 30 year note and I’m expecting approx. $2,500 -> $2,700 per month in gross rents right now. My partner’s agreed to invest 50% since we both believe the real opportunity is in appreciation / future rents in this Central Austin property.
Thanks,
Ritesh
ANSWER
Ritesh,
I’m not sure exactly what your question is, but here are a few comments:
Make sure you accurately estimate your rents. I often see people OVERESTIMATING rents dramatically. Right now it’s generally very hard to rent stuff. My Austin properties usually rent fairly quickly, but Round Rock and Leander take forever to get rent. Competition is stiff and rents are low.
Regarding negative cash flow – everyone has different philosophies here depending on their financial plans. Some people will not do negative cash flow either because they don’t have the resources to sustain it (especially during long periods of vacancy), or because they don’t believe in negative cash flow under any circumstance.
I personally will do negative cash flow if I get a lot of equity up front or if I get high appreciation. For example, I bought a property in central that cost me $150K, after repairs, that I’m now renting for $1200/mo. With a PITI of just under $1400, I’m losing $200/mo in cash, but the property is easily worth $205K, and probably appreciating $10K+/yr. With this amount of equity and appreciation, and the corresponding tax breaks this property generates, it’s a great deal for me, and in 8 years, I’ll probably be able to sell it for $300K. So, my $2400/yr investment (taken as deductible losses) should yield me $150K+ (taken as long-term capital gains) in 8 years. If you can find a better investment with that return, let me know.
If your strategy is to buy at full retail price and take negative cash flow. Well, I pass of those deals, unless it’s in a high apprecaiton neighborhood. Hey, it’s still mostly a buyers market – take advantage of it.
Phill
Rehab opportunity – Area 10
DEAL POSTED TO INVESTOR SITE:
Type of Home: : 3 bed, 2 bath,
After Repaired Value: : $140k
Repairs: : $15k
Asking Price: : $101K
Remarks: : I’m posting this for a broker that I spoke with that has a
deal that I’m not equipped to handle, so I thought I’d pass it on to
the group. Please keep me in mind if you are able to take it ;0)
Home has a slab foundation with major issues. Centex Foundation repair
estimate is $10,700.00. As a result of the foundation issues there is
some drywall repair needed inside (cracked walls). Call Jennifer for
more details. Home is in preforecloser, so time is of the essence.
Broker has negatiated a short sale with mortgage company. Price is
$101K which is FIRM
Potential profit of $20K + for a rehabber that can close quickly and
isn’t afraid of some foundation repair
Jenifer
ANSWER
Jennifer – I don’t mean to pick on you, but I do need to make a point about this and similar posting here –
A house with “major foundation issues” that will cost $10.7K to fix, but only needs another $4.3K of other repairs and renovations??? A “potential profit $20K +”???
If my math is correct =
A “potential profit $20K +” is based on allotting less than $4K toward:
· All purchase closing costs
· All resale sales closing costs
· Any and all resale realtor commissions
· Any and all loan or borrowing origination, initiation, procession, discount, whatever costs
· Zero holding costs – presumably by completing the major foundation repair and renovations in less than a day?
· Assumes that the entire renovation budget is $4.3K after foundation…
· Assumes home sells and closes and funds approximately one day after the single day it takes to buy and renovate the home, and do the major foundation repair.
Normally, one would estimate around 15% or more to pay for all of these things, which would leave approximately no profit for a rehabber…
I know I speak for many on this user group by saying “Please don’t sugar coat these deals to look like something they are not”. It’s not honest, and it just makes you look un-credible or unknowledgeable or untruthful.
I can fully appreciate that the deal is what it is. This is a home offered for $101K, with a $10.7K foundation problem, and it will probably require some additional repairs/renovations that need to be determined and budgeted by a buyer. It has an ARV of $140K. If somebody wants such a deal, great. To market it as a potential $20K + profit rehab deal is not accurate.
Phill
Mobile Home Deal
Here’s a rundown of the property:
1.5 acres purchased in ‘01 for $20k
Mobile home for $80k
1200 sqft concrete slab garage/workshop constructed for $30k
Driveway and perimeter security fence with locking driveway gate added.
The seller has ~$140k in the property. Obviously, that does not translate into a realizable valuation. However, aquiring the property for just shy of $62k seems like a great deal.
The property requires approx. $5k in repairs which the seller has escrowed.
The market for trailer homes isn’t the best. However, if the tennant were to default, recouping the 62k should not be an issue given the property’s value and given that the escrowed funds will already have been spent for the rehabilitation of the property.
Does this still seem like an overly risky endeavor?
Dan
ANSWER
Dan,
I hate to discourage investors from investing, but I also hate to see investors lose $$.
I don’t know all of the specifics of your deal, and there may be strong extenuating circumstances, however, we did an analysis of every single mobile home, on 1-2 acres, SOLD in the entire 5-county MLS since August 1 ’05. Of the 47 that sold, only 5 sold for $65K or more, and each of those was described as in good, like new, or excellent condition. The average price was $29/ft, including land. The average list price for every 1-2 acre property currently available is, gulp, $51/ft. That means on average these things are discounted at sale an amazing 44% from average list.
I did not look up the land value on each of these to complete the analysis, but it’s clearly obvious that the mobile homes are not worth a lot, regardless of what people pay for them. And, they tend to become worth less and less over time. Your seller, for example, paid more for his new mobile home without land, that anyone has ever paid for any used mobile home including land, utilities, and all other outbuildings and improvements over at least the last 6 months.
Now, would I want to take a deal where I personally finance one of the 6 most expensive mobile homes in the 5-county area? Probably not. Could you be the guy to pull it off and make a lot of money? Maybe so. Whatever you decide to do, I do sincerely want you to do well.
Phill
Foreclosure on Mobile Home
Does anyone have suggestions for how to help someone facing
foreclosure on a mobile home & lot and they are approximately $45,000
upside down on loan:retail value? The bank would have to discount the
loan nearly 40% just to break even.
These folks would really like to avoid foreclosure.
Thanks,
Peggy
ANSWER
Peggy,
On the Topic of Mobile Homes –
It is possible but unusual for a lender to accept a short payoff on a mobile home, with this large of a discount. Even if they did, the deal would depend on someone else wanting to finance and buy the property – and it’s hard to find buyers for these properties, unless selling them with owner financing (which is not done in a short sale situation).
In most cases, when you buy a mobile home, unless you bought it used at a 75% discount from new, you should go ahead and start filling out the bankruptcy paperwork, because you will need to have it completed by the time you eventually need to sell.
The economics are:
· Used single-wides are worth $5-15K or less
· Under single-wides with land are worth: $land value + $5-15K or less
· Used double-wides are worth $5-25K
· Used double-wides with land are worth: $land value + $5-25K or less
The ‘or less’ has to do with condition or the cost of demolishing or removing the mobile home from the property. Unfortunately, I see people buying these things new for $30-90K, or $60-$140K with land (even when the land is only worth $5-25k). Why do people buy these? It seems like a good deal to get a home and 1-5 acres for <$1000/mo or a home alone, for < $600/mo… until/unless you go to sell…
The only way I’ve seen people get out of these are:
1) The land has intrinsic value that has appreciated to compensate for the huge write-off of the mobile home (this is rare)
2) The homeowner decides to live in the home for the duration of the 30-year loan (this is sad)
3) The homeowner finds some other misinformed buyer to take over their payments through owner-finance, lease, or lease/option (this is common)
a. These buyers are often other family members or friends
b. Of course these deals usually eventually fall apart and become #4
4) The homeowner walks away and is foreclosed on (this is typical)
5) The homeowner wins the lottery, gets an inheritance, or is otherwise successful in life and/or business to the extent that they are able to pay off the loss and get out (this is a miracle)
We’ve had dialog on this topic from time to time, but I have yet to see a solution for people in these situations. I know there are some people, like Dan Francis and Jack Burns, that can sometimes help find people to take over payments on mobile homes, but usually these are for properties that are not already many payments behind, and on the verge of foreclosure. If these buyers a can catch up, this may be an option.
Phill
Advice on my first deal
Hi, this is Nirav, I need some advice.
I am actually going to place my first bid within the
next 24 hrs. The house is listed at 93,000, I looked
at the CMA’s and all of them are going from 110,000 to
127,000. I have done a walk thru inspection on the
house, and needs very little work. I was just
wondering where I should start my bid at. It is a HUD
home owned by the bank. Appreciate any response.
ANSWER
Nirva,
I always suggest the classic formula of 70% ARV (After Repaired Value) – repairs. If this home should be worth an average of around $120K ARV, and it’s going to take you $5K to renovate, you would bid $120K x .7 = $84K – $5K repairs = $79K.
This formula assumes a relatively conservative 15% cost of sale and carry/money (C&C), 5% contingency, and 10% profit. Obviously, if you have estimated your renovation costs well, and the home sells in a timely fashion (because it is a fairly ‘resalable’ home), you won’t use up your contingency. Also, if you have cheap money and/or you use discount realtor services or sell it yourself, some the 15% C&C costs can be reduced, though it may not actually be worth it for a newbie to cut these corners.
In this example,
In a best case resale scenario, your profit might be: $127K (resale) – $79K (buy) – $5K (reno) – $7.5k (C&C) = $35.5K (profit)
In a worse case resale scenario, your profit might be: $110K (resale) – $79K (buy) – $10K (reno + contingency) – $16.5K (C&C) = $4.5K (profit)
Something in-between is much more likely.
The truth is, however, it’s pretty hard to actually find and get 70% deals. Because of this, most people take a gamble and bid closer to 80% or even more. At those margins, you would bid up to $91K for this home, and cut your best case profit to $23.5K and your worst case to, gulp, a LOSS of $7500. As you get better and better at doing this, you will be able to tighten up your ARV, reno, and C&C estimates and feel more secure about what you can afford to bid. I just negotiated a 75% deal this week, for example, that I’m pretty excited about. $235K (ARV) x .75 = $176K – $25K (reno) = $151K (buy price). Would I love to get this down to 70%? Sure, but I also realize that pigs get fat and hogs get butchered, and I’d rather just be a fat pig 
The biggest mistakes I see newbies make is going into deals too rosy-eyed. They overestimate what homes will really resale for, by overlooking problems the home has, like being on a busy street or having a funky layout. Sometimes these problems are the reason the home is available at a screaming price today. Newbies also underestimate renovation costs and don’t take into consideration that once you start pulling walls down, etc. more problems are likely to show up. The real ‘cash and burns’ occur when a newbie borrows too much money at a high interest rate and runs out of $$, or has to price the home above what someone will really pay and the project starts going into the red. I just bought one of those, from a newbie, in midtown last week. He had to cut and run.
The second biggest mistake I see newbies make is being too cautious and never doing anything…
Good Luck!
Phill
Condominium Pros and Cons
Hello,
I am thinking of buying a condominium to use as an interim place to live for about a year while I build my dream home. However, I have heard mixed reviews about buying condominiums as an investment. The way I look at it is if it has room for increasing value in the near future and the HOA fees are not exceedingly high, then why the hell not? Does anyone have any experiences with purchasing condominiums as investment property that you would like to share so I can make an educated decision?? Thank you in advance.
David
ANSWER
David,
Maybe with low HOA and in a good location… but, in general I say – pass…
As an investor who FLIPS a lot of homes (especially short sales), I can tell you that condo’s are absolutely the hardest things to sell. I have never successfully flipped one, because they take too long to sell. The big problem is the condo fee. As a home seller, I’ve discovered that most buyer’s don’t really care about anything other than monthly cost. As ridiculous as this is, time and time again, the buyer’s don’t care about actual property cost, actual interest rate, fees, etc. All they want to know as their eyes glaze over with detail is “What’s the monthly cost”. With condo’s you pay PITI PLUS condo fee, which at $150/mo +/- often pushes the monthly cost over what an equivalent single family home would cost. I know there are exceptions, and all the folks who love or own condo’s will scream, but I still don’t buy them…
Why not pick up a little house in east or central that has a good shot to appreciate 10% over the next year? Buy the right house, and you live for free
Phill
Lead for Leander – EXPERIENCED INVESTORS ONLY
Yes I was needing to sell my house in Leander… Westwood edition..
It is a KB Home we just bought it in Jan ‘05, then me and my husband
seperated and we are going to be getting a divorce and i was trying
to see how i can get rid of this property before it gets forclosed
on… If you think you can help me please email me back… That is
the best way for me to be contacted I work M-f 1:15-10pm so I am
never at home and i do not have my cell phone any longer thank. Or
you can give me a time when it is conveniet for me to contact you.
Thanks
Daisy
ANSWER
Daisy,
We have Three programs that might fit your needs:
1) I have tenants that are looking to buy a property by taking over the prior owner’s payments.
2) I negotiate short-sales directly with lenders. A short sale is a transaction where we negotiate a discount on your loan such that the property can be sold at a reduced price avoiding foreclosure.
3) Deed-in-lieu of foreclosure. A program where you give up the property to avoid foreclosure.
Please contact me to discuss this further
Phill Grove
