This house is going to cough up $26,000 in rents over the next 18 months.
Meanwhile, we found this house after two hours of driving our farm area and taking down addresses of vacant and abandoned property.
I researched this property and found out the owner lived close by. The property is in default, but not scheduled for a trustee sale.
It's been vacant since last Fall.
Now all this information helped me know how to pitch the seller. The fact that the seller wasn't even trying to rent out the house tells me this seller was tired of dealing with it and out of options.
Well this house is a great candidate for a loan mod and/or a short sale. The property is in terrible shape outside, and needs a cosmetic overhaul inside. Flooring, paint, some hardware replacement, and built-in appliance installation(s). Then there's landscaping overhaul (cleanup, trimming and watering). Total estimate $3,500 (less if we don't replace the flooring).
Market rents are $1.00 per square foot or $1,460 a month with 1,460 square feet of rent-able space, not including the garage.
While we rent the house out, we'll work with the owner to modify the loan, or short it. The 2nd will get about $3,000, and the first will be reduced by $30,000 for a total encumbrance of $90,000. Plenty of room for profit with a sale of $158,000 to a credit challenged buyer.
Meanwhile, our rent of $1,460 over 18 months will net us about $26,000. We'll pass on the cost of back taxes to the end user, if our short sale/loan mod is successful, and include it in the sale price. Meanwhile, we've got insurance costs of about $700, and we're paying the buyer a few hundred for granting us title (held unrecorded in escrow, which is our personal safe deposit box), until we can successfully negotiate either the loan mod or short sale.
All this to say, Sub2 profits come after taking action, not sitting around wishing things were easier!
Normally, I would tell you about just the pretty houses we buy, but this proves that money can be made out of something ugly, too!
If you would like to know how we structure deals just like this one, click the link below.
"How To Make $26,000 in 2 Hours...!"
Wednesday, March 31, 2010
Friday, March 26, 2010
Thursday, March 25, 2010
My partner Jim called me up a day ago and said we need to go 'drive for dollars' tomorrow (or something like that). I said, "Great, let's go!"
So we arranged to meet at our regular car pooling place at the bourgeoisie "Le McDonald's" home of "Le Big Mac de Deliciose". After getting on the road, Jim pulled out his folder packed with prospective deals, and gave me directions on where to head.
We drove by some familiar houses that we'd negotiated on, and a few others that had just become obviously vacant and abandoned.
After driving around the farm writing down new addresses for about two hours or so, we came across a house that once had quite lush landscaping. I pulled in the driveway, got out, and walked up to the garage door and found it unlocked and opened it. Thankfully, someone had already bashed in the entry door from the garage to give us access! Jim and I went in and explored. It was beautiful and well laid out. Later, I discovered that the owner lived around the corner.
As we continued driving, we saw a woman out in her front yard appearing to rake the dirt of her rental house. I got out and jokingly asked if she was preparing the house for rent? She laughed, and said, "No, I live here." I laughed, too, and added for giggles if she was interested in selling. Before she could answer, I said, "Come on! Tell me you want to sell this place." She laughed again at my forwardness (I think), and said, "OK, it's for sale, if you say so."
With the conversation set firmly on friendly ground, I was able to discover that she owned a condo nearby that was in foreclosure, but the bank hadn't filed an NOD yet. She had just stopped making payments when the renter bailed. Her interest payment was very low, but the rent didn't quite cover everything.
My mind whirled. If I sub2'd this condo and resold it on a Land Contract for the loan balance, but at market interest rate, I could not only get a $10,000 down payment; make a couple hundred dollars a month on the payment spread, but save this lady's credit, and become a hero. At this point Jim interrupted me and saved me from offering this woman any money! Just kidding. I didn't offer her a dime.
Bottom line: We're taking title, reselling the condo with $10k down; making $200 a month in cash and giving the seller nothing, but a credit boost. Yay. All that just by asking a "landlord" if she wants to the sell the 'hell hole' that she's raking the dirt on.
Back to the other house. We're talking to the seller, offering them a few hundred bucks for the right to control the property, lease it out, and negotiate a loan modification (if that fails, we've collected rent for about 18 months at $1,300 a month) without paying property taxes, but maintaining the seller's fire insurance.
Both these prospects came just from driving around YESTERDAY! Does this happen every time? No. But it happens often enough to keep us jazzed up about doing small sub2 deals.
BTW, how much money does this mean we made with our two hours of driving around? Well, $1,300 x 18 months is $23,400. Then we've got the condo with $10k up front, and $200 for another 18 months. That's another $13,600. So we will have made $34,000 in 18 months for maybe 2 hours worth of prospecting.
Now you might ask, what's it gonna cost to fix the condo and clean up the house? We'll have $3,500 invested total. So, $30,500 isn't too bad. That's still about $15,000 an hour less prep work. Okay, Jim and I are splitting the profit so it's actually $7,500 an hour. That's better than my surgeon makes an hour.
If you'd like to know exactly how Jim and I put these profitable sub2 deals together click the link below.
You'll have an opportunity to provide your name and email address and then be directed to the Screw The Bank information page via email.
Screw The Bank! Sub2 Profit System