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Thoughts on this one - http://www.dealmakerscafe.com Forums

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Terry (Houston)

"Thoughts on this one" , Mon 27 Nov 12:25

I have a guy who is going through a divorce. He is 5 payments behind at about $1850 each.
The loan is for around $210,000.
It needs around $7,000 in work.
Comps put the house at around $249,000
All of the numbers are based upon what the guy is telling me. I will verify.

He is going to go into chapter 13 to keep from the foreclosure but because he is going through the divorce he wants out of the house.

Seems open to any and all discussions.

Thoughts on the spread?

Thanks
Terry

...There is no chance no destiny no fate
that can circumvent or hinder or control
the firm resolve of a determined soul...

Ella Wheeler Wilcox

Terry (Houston)

Replies:

Terry (Houston)

"Thanks!" , Mon 27 Nov 22:00

Had a great holiday. Any time spent with the family is super.

Thanks to William and Lynn I thought it was a little thin and a no go.

Sometimes another perspective helps.

Terry

...There is no chance no destiny no fate
that can circumvent or hinder or control
the firm resolve of a determined soul...

Ella Wheeler Wilcox

Terry (Houston)

WilliamGA

"Re(1):Thoughts on this one" , Mon 27 Nov 13:09:

Terry,

Hope you and your family had a GREAT holiday!

Assuming all the numbers are correct, this one would be a little too thin for me.

5 Payments @ 1850.00 plus late fees, interest and atty fees has got to be up to 12k or more by now. Add to that the 7k you estimate for fix-up and you are close to 20k out of pocket to get the house ready to sell. 20k added to the loan bal of 210k puts you into the house for 230k with the value at only 250k or so, 92% LTV on this one. I buy houses with higher LTVs than this but they always have a GREAT loan on them (6.5 to 7%) that will allow for a wrap sale. You didn't say what the loan rate was here but that monthly payment would scare me anyway. Potential profit here looks like only about 20k.

Way too much risk for that profit for me because....

1. Harder to find someone who can do that 1850.00 per month payment, here at least.

2. VERY hard to find someone who can give you the 20k down that you need to get all your cash back out that you had to put in.

3. Sales are slower this time of year. I buy now counting on holding for a few months, at least until after the first of the year. At 1850.00 per month, it doesn't take much "holding" to eat up that 20k in profit.

I would skip this one, but thats just me. I hope to see others comments on this one.

WilliamGA
4Rent To Own Homes Inc.
www.4RentToOwn.com

[this message was edited by WilliamGA on Mon 27 Nov 13:10]

Lynn
Moderator

"Re(1):Thoughts on this one" , Mon 27 Nov 12:55

"I" would pass on this one.

Principle balance of loan is $210,000
Back Payments ("if" he is telling the truth) are $9,250 + attorney fees yadda yadda yadda. You can bet that another payment is coming due on the first which brings you to $11,100.00 plus fees.

If my math is right you will be into the property (including repairs) $228,100.00 which is only about 8% under market, and if you are selling on lease-purchase you will need a down payment of $11,100 just to break even (without any repairs, advertising or additional $1,850 payments).

Higher end properties are tougher to move, and in my market it would also be tough to get the rent high enough to give me any positive cash flow, so the way that I would look at it is that I'm not making any money up front, in the middle, and not enough on the back end for the risk.

Others will probably have other opinions, but I personally would keep fishin!

Happy Investing!
Lynn