Hot Bargain Property January 22, 2008

By Dan Melson on January 22, 2008 4:40 PM | Permalink | Comments (0)

Lender Owned Diamond in the Very Rough

General: La Mesa, 4 bedroom, 2.75 bathroom

Con:

What's Wrong With It: All torn up on the inside, not inhabitable as it sits. Parking is awful. Lot needs landscaping. Residential Lenders won't touch it without a working bathroom. It will cost about $100,000 to fix all of his.

Why It Hasn't Sold: See the above.

Who it's Not Appropriate For: People without cash for a down payment and fixing it up.

Pro:

Selling Points: Nice layout, and the person who was working on it had some good ideas. Plenty of room in living room and den, huge kitchen. Master bedroom separated from other bedrooms. Huge lot, over a quarter acre - plenty of room to do just about anything you want in the back yard.

Who Should be Interested: People with some cash looking for a place to move up. People with the ambition to create their own dream home.

Why it's a Bargain: The place is ugly right now. With about $20,000, you can get it inhabitable and then make it your dream home at your leisure. Most buyers can't qualify to buy it because they haven't got the cash.

Financial:

What I think I can get it for: $240,000.

Monthly Payment examples: I've currently got a thirty year fixed rate loan available for qualified buyers at 5.25% for one total point., but you're going to need a commercial loan in order to buy it.

With no down payment: not applicable

With 20% down: Purchase money loan would depend heavily upon credit score. Once it's inhabitable, fully amortized payment of $1061 (APR 5.425), assuming the same rates as today.

Other financing options are available, potentially lowering the payments, but I'm quoting real loans that real people can get, that will stay exactly the same until you pay it off.

Investment potential: If you keep it ten years and it averages only 5% annual average appreciation per year: Based upon a purchase price of $240,000 the property would be worth approximately $390,000. If you held it those ten years before selling, you would net about $230,000 in your pocket (not including increased value from updates!), assuming zero down payment. As opposed to renting the $2200 per month most comparable currently available rental and investing the difference at 10% per year tax free, you would be approximately $340,000 ahead of the renter, after the expenses of selling.

To learn more: Agree that you'll use me as a buyer's agent if you buy it. If you don't like it or don't buy it, no obligation is incurred. If you're not working with someone who will go out and find properties like this, maybe you should consider working with me instead!

Contact Information:

Dan Melson, Realtor
Action Realty Inc
9143 Mission Gorge Road, Suite A
Santee, CA 92071
619-449-0723 X 116

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