I am very excited, I just closed on another property this week!
Here's my story..
I got a call from a gal in foreclosure that said she wanted to sell her house fast. After talking with her, I automatically knew that she was very " motivated". The property was a townhouse in the Northwest which is in my farm area. At the time, I didn't know when her trustee sales date was, but I automatically set up a meeting with her. When I got there, it was only the wife and she showed me around the place. It was a fixer, but it appeared to only need carpet and paint. There was a few cosmetics like a broken end cap of the counter, and plastic pieces missing from the swinging doors, etc It looked terrible, but I knew it would clean up nicely.
I immediately liked the floorplan, it was a 2/1 with one bedroom as a loft. What is interesting is the bathroom is bigger than in my 2000 sqft house! Its huge.
I asked for paper work and she could only bring up a few old statements and the trustee notice. My jaw dropped when I saw that the trustee sale was in only a week!
I already did due diligence so I made her my offer. She basically said "well, at least I'll get something for it and save my credit."
The only way to do this one is private money or buying it subto. Option #1 would be subto , but my private lender was primed to do the deal. I signed up for 85k. What was interesting, was there was a comps at 85k, 100k, 120, and 123k. I couldn't figure out why there was such a big spread. I concluded that investors must of purchased the lower ones. This helped me, because I could show her some real numbers. Since I didn't know exactly what the arrears are, I told her that her profit would be 85k less all liens and arrears.
We signed up and I went to work. I hired a title company to help out, actually, she did a wrap on the existing mortage. Its the title companys way of doing a subto. I setup loan servicing so I will pay the title company and they will pay the bank directly. Its 5% fixed interest for another year or so.
I spent $400 dollars to do an appraisal. After doing more research, I decided to put this one in my long term portfolio so I decided to make it a rental. I wanted to raise some cash before buying a rental, but this one will work. I did my own home inspection.
So, exit strategy is to fix up (5k) and do a re-fi. The tricky part is that the title needs to be seasoned for a certain time before qualifying for a re-fi. My broker said that I can do this in about 30 days. This could be a no money down deal!
Fortunately, we were able to get the payment to bank the day before the sale and closed! It took about 6 days and everything had to be perfect.
The deal is awesome because I 'm finding out the comps are 10k more than I thought. After cleaning it up, this could sell for about 130k! This is how crazy some sellers can get. There was a townhouse across the street from this one that had a sold sign on it. I called it the other day and the agent said that it was listed for 135k and sold in about a week! I don't know the sale amount , but you know its going to be high! How could these guys not do their research? I just bought a subto for 70 LTV.
The sellers are moving out tomorrow and got a new apartment. I had to give them some advice on getting qualified. Turns out the foreclosure was already on their record.
I'm going to get my guys to fix the place up starting this weekend.