Author Topic: Case Study: First Rental Purchase  (Read 2096 times)

bluecheeze

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Case Study: First Rental Purchase
« on: September 07, 2014, 11:42:26 PM »
Hey wanted to throw this out there to see what you experienced owners thought....

Single Family Residence, 2BR, 2.5BR
Purchase= $50,000+$2,500 auction fee
Repairs= $5,000 (carpet,paint,minor drywall)
Annual HOA= $140

Area rent for similar = $1,250
Taxes= $900 annual
Insurance= $900 annual
Cash deal

In a community of other attached single family residences (townhomes- though they are not listed as such).  Pretty good area.  This one is up for auction opening in 10hrs.
Same floorplan recent sales are $155k-$165k

Could even be a good flip I suppose...

What do you guys think? Seems like a good deal to me but I just want a check as this will be my first investment RE purchase.
« Last Edit: September 08, 2014, 01:11:07 AM by bluecheeze »

waltworks

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Re: Case Study: First Rental Purchase
« Reply #1 on: September 08, 2014, 07:55:15 AM »
If your numbers are correct:
1) Good rental, assuming it's not trashed.
2) No way will it sell for that.
3) Make sure what's on auction is the first lien and that they'll give you title insurance.
4) If it's one of the online auctions, keep in mind that all you are getting if you "win" is the *right to negotiate further* with the bank in most cases. They will most likely try to get significantly more money from you, and if that doesn't work, they will re-auction the property. Over, and over, and over. I'd stay away from most of the online auctions for that reason.

Foreclosure auctions are usually a bad place for noobs. You might do great, though. Just gotta be super paranoid.

-W

bluecheeze

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Re: Case Study: First Rental Purchase
« Reply #2 on: September 08, 2014, 08:31:07 AM »
Interesting- it is an online auction so that scares me.

2) do you mean the auction won't go for 50k? or the resale?
3) good point I will have to read through the documents
4) I suppose I need to make sure if no deal is reached that I won't be out any of the auction fees?  I don't mind wasting some time trying to get a good deal, but I don't want to pay the 2,500 auction fee only to have the bank say they won't sell for under 70k or something like that.

Seems like all of the good deals I have been finding are foreclosures :-/

kittystache

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Re: Case Study: First Rental Purchase
« Reply #3 on: September 08, 2014, 08:53:30 AM »
I like the calculator on GoodMortgage.com


waltworks

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Re: Case Study: First Rental Purchase
« Reply #4 on: September 08, 2014, 10:11:37 AM »
What I meant by the "no way will it sell for that" is that you won't be able to buy it that cheap. The word was out years ago about foreclosure deals and there are tons of people looking to buy them, so they basically end up going for market price. The SOP on the online auctions is to list for WAY cheap but if/when the places actually sell they will go for much more unless there is something *terribly* wrong.

-W

mooreprop

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Re: Case Study: First Rental Purchase
« Reply #5 on: September 08, 2014, 11:05:02 AM »
Hi, I am a fairly experienced investor and just bought my first house via online auction 2 months ago.  I wrongly assumed that it was just like any other auction, but it went well for me anyway.  I did get an excellent price, and was able to get title insurance/clear title to the property, so I would disagree with the earlier comment that there are no good deals.

 However, please read the documents carefully.  I did not realize at the time that many of the properties that are being auctioned are tax liens, etc.  This means that in my state, Indiana, you would have to wait for a year, then would be responsible for notifying every lienholder that shows up on the title search, then would need to petition a judge to give you title, then submit a petition to the judge for a possession order, then deliver that to the sheriff, then wait for the sheriff to remove the occupant, then still not have clear title for up to 40 years (if there is a foreclosure involved) unless you spend another $1500 for a quiet title proceeding.  So, if this is what you are buying, then you may be looking at tying up your money for 1-2 years and spending thousands in attorney fees to get clear title, or worse, not being able to get clear title if one of the lienholders challenges your ownership. 

Luckily for me, the house that I purchased was not one of those.  I purchased a house for $26,000 that is worth $60,000 and just rented it for $725 per month.  No one tried to get me to up my price after the auction closed and it all went smoothly.