What Should I Do

[pureadvantagerei]

I am new to RE Investing and I have a situation. I have had a home owner call me willing to walk away with nothing. The appraisal value is 126,000. She owes around 92,000 and is 3 months behind. She has received a letter from the bank asking for 1900 now. Monthly payment is 960.

How should I do this deal?
I don't have a lot of cash myself right now, but I may be able to borrow some.

Thanks for your help
Jeremy Jordan

[taxlienadvisor]

the first thing you need to do is decide on your exit strategy.

what do you plan on doing with the property?...rent, flip, etc.

if it is appraised at $126,000...you can probably sell it for about $60 - $70,000...so I wouldn't recommend paying $92K.

[TonyDiCorpo]

if u can make up the back pmnts, u can buy it Subject to but only take deed IF the lender agrees to the forbearance.  Do not mention buying it S2 to the lender of course.  Advertise to get a buyer for $6k down or so, no Qual, pay back what u borrowed out of the down.  Add what ur market will bear to the mo pmnt as pos cash flow maybe $100 or 200/mo, add $10-12k to the back side of the loan, have your new buyer refinance in 2 yrs and you will have a nice little paycheck.  refi's are always easier than PMM's.  your buyer has an equitable interest in the property if they are making pmnts on a CFD with u.  be sure the orig loan pmnt includes the PITI before u add anything to the pmnt.  you also have to be sure you dot your i's and cross your t's: title search, etc.  do ur DD.

When selling w/no bank qualifying, Buyers will always buy on the payment, not the price of the home.  The home will sell itself, so always sell the mo payment.

[pureadvantagerei]

What are a few of your abreviations

PMM and CFD

Thanks
Jeremy

[John_in_NC]

You don't do this deal! Your margin is too thin. If you really want this property, you would be better off just to let it foreclosure then buy it from the bank. But if she is calling you that probably isn't the case. Don't mess around with junk like this.

We are in a time of unprecedented buying opportunities, why would you do a crappy deal like this?? I am buying a commercial property right now, in the middle of downtown, for 190K. I have a June 2008 appraisal of 870K!! Now that is at the top of the market, but the owners also have a 1999 appraisal of 285K. I'm doing one right now (to the tune of 2500 dollars) that will probably be around 400K.

Shoot for at least 50% off. They aren't easy to find, but they were impossible to find a few years ago.

[TonyDiCorpo]

What are a few of your abreviations

PMM and CFD

Thanks
Jeremy

PMM- purchase mortgage money
CFD-contract for deed

[John_in_NC]

if u can make up the back pmnts, u can buy it Subject to but only take deed IF the lender agrees to the forbearance.  Do not mention buying it S2 to the lender of course.  Advertise to get a buyer for $6k down or so, no Qual, pay back what u borrowed out of the down.  Add what ur market will bear to the mo pmnt as pos cash flow maybe $100 or 200/mo, add $10-12k to the back side of the loan, have your new buyer refinance in 2 yrs and you will have a nice little paycheck.  refi's are always easier than PMM's.  your buyer has an equitable interest in the property if they are making pmnts on a CFD with u.  be sure the orig loan pmnt includes the PITI before u add anything to the pmnt. 

When selling w/no bank qualifying, Buyers will always buy on the payment, not the price of the home.  The home will sell itself, so always sell the mo payment.

This is complicated, risky, and a waste of time for reasons stated above. Why bother? If you don't have the cash, you are pissin in the wind to be honest. It's gonna be real tough to do anything. I'd focus on fixing this if I were you.

The tried and true method of investing involves buying at HUGE discounts. Then you have a wide margin for errors, and options. When you buy a property at 50% fair market value, the options are really good. Cashflow should not be a problem, reselling at 80% FMV should not be a problem, refi's should not be a problem, see where I am going here? If you aren't sure what FMV is for the property you are buying, you have no business buying it.

[TonyDiCorpo]

I was going to tell the OP that there are numerous types of investors out there with they're preferred methods of investing.    The OP asked 'how to do the deal' and I gave him an option for this situation.  If you do not have a lot of cash as the buyer stated, S2 is a viable method to invest.

You gave him an option as well, for another deal that has yet to offer itself to him but can be found as they are out there too.  However both have merit.  S2 method is designed to offer a quick solution to a lot of motivated homeowners, and to offer the investor multiple revenue streams.  There is buyer for every house.

[tatertot]

Appraisal value is $126,000? Who appraised it, why did they appraise it, and when did they appraise it?

It's possible that the house is worth less in today's market than she owes on it.  You will want to verify that $126,000 fair market value independently of what the homeowner tells you.

Payment is $960 on only $92,000? Holy cow. How high is the interest rate on the mortgage?

With no cash, you are not in this deal.

You could buy subject to, but you have to bring mortgage taxes and insurance current, plus deal with any liens.

Rent to own buyers flake out, so you have to be able to make the mortgage payments if your own buyers don't.

Interest rate on the existing mortgage is high and maybe set to go higher. That doesn't leave you much leeway in making a few dollars on the interest rate spread.

This house could possibly be a short sale, but you need access to cash in order to buy a short sale.

[tatertot]

The seller on this house needs to find a family that wants a house for themselves and are happy to get a bargain price, and can afford to refinance it away from that high interest rate.

Unless that is your circumstance, this isn't going to be much of a deal for you to make money with.

[chunkoftheearth]

interesting discussion.  I think everybody is a little bit right here.  Let's look at the numbers.  You have a spread of 34k, right?  A couple of guys has said no deal based on that.  One guy "tony" says a deal might work.  I agree with both.  A deal is possible.  And it may not be either.  It will depend on your preference I think.  Make sure to understand that if you DO in fact take the deal Sub2 that you understand what the costs are in detail to discharge the mortgage.  I see where Tony is going with it which seems to be as long as you make money do the deal.  But I also understand the other posters too.  One thing Tony said that I disagree with is the idea of selling CFD.  I think for this that would be the wrong approach.  Gives too much legal rights to your buyer.  Just sell rent-to-own because there are lots of buyers for them AND you don't give up too much control.  But even that point is debatable because if Tony opted to sell CFD AND he can collect a sizable down payment (i.e 15-20% down), then even the CFD as the exit makes sense.  One of the guys who replied mentioned this might be too risky.  Here's what I'd say.  Understand every investor has their own comfort.  When you buy Sub2, what risk is there?  You don't put money down, right?  You don't bring payments current until you locate a future buyer of your own, right?  That's at least how I do it, not sure how others do it.  Point is it might be good experience for this poster to get his/her feet wet and use this as an opportunity to work a deal.  What is the worst that can happen?  Either he'll make money and learn how to Sub2 and take skils learned to apply to the next one, right?  Since he isn't putting money into the Sub2 entry, not saying there aren't risks, but if he does it properly could make money and risk is minimal.  Just make sure though you know the numbers inside out and work fast to get a buyer on RTO so that you can quickly make up the back payments and put a bit of money in your pocket.  It will be good experience I think for the poster to get his/her beak wet.  As for the 960, I guess the poster has to clarify if that is PITI or not.  Regardless you need to make sure you make money going in, during, and going out.  All about working the numbers.  By the way, anytime you put money down (even a dollar) it is at risk.  So DON'T PUT MONEY DOWN ON THESE DEALS.  Do creative, no money down deals such as L/O's, Sub2 and even cash deals.  NEVER PUT DOWN A DIME.

[John_in_NC]

Well my advice would be NOT to do the deal, but to find somebody local that is successful and learn from them. Run this deal past them.


 An internet forum like this is great to further your RE knowledge, but a horrible place to start out. Too many hawks for hire on here calling themselves "mentors" and "coaches" giving hollow minded advice.

Do people really fall for this?

[ShortSaleArtisan]

Well my advice would be NOT to do the deal, but to find somebody local that is successful and learn from them. Run this deal past them.


 An internet forum like this is great to further your RE knowledge, but a horrible place to start out. Too many hawks for hire on here calling themselves "mentors" and "coaches" giving hollow minded advice.

Do people really fall for this?

Why is the homeowner walking away on $30,000 of equity? 

[chunkoftheearth]

Re-read the original post.  The homeowner is 3 payments behind.

[Dave T]

Payment is $960 on only $92,000? Holy cow. How high is the interest rate on the mortgage?

If this is the loan payment (PI only), then this could be a 15 year loan amortization at 9%, or it could have been one of those option ARMs that had a negative amortization if only the minimum payment was made each month.

If this is a 30 year amortizing loan, then I am guessing that the $960 payment is PITI.