After Passing On The Manufactured Compound, I Look Upward For My Next Move
Stats:
3BR 2BA - 2,496 sq ft
Built: 1976
Lot size: 0.92 acres
This is a foreclosure that has been on the market since January. It has some issues that prevent it from being eligible for a conventional loan.
- Mold in the central air ducts
- Gas line leak
- The pool pump is missing (probably has been stolen)
I was able to get a copy of the mold report. The estimate to fix it is $6,348.77.
Since it has these issues, they say cash only in the description. I believe that this place is the perfect candidate for an FHA 203(k) loan.
A 203K loan can be used if the property is to be used as a primary residence. As this home is in a highly desirable area of Tucson with good school zones, I have no problems living here a couple years to get my appreciation gains tax free. In America, if you live in a property for 2 out of the last 5 years, any profit you realize is 100% tax free up to $250,000 per individual ($500,000 for a married couple).
The current asking price is $305,000. I feel that this is way too high as the bank will not complete the required repairs. The average sale price for a distressed property is just 62% of the after repair value. In this case, the after repair value is $389,000. This means that the property should be selling around an average of $241,000.
Which was in my range of $240-260K eyeball estimate.
Previous Offers
I had been watching this property for some time because it has an amazing "garage." Perfect for my eBay use. Check out the pics further down this post.
My agent spoke to the other agent and was told that some offers had been thrown out for being too low. The bank that owns this is not local and is one of those mortgage aggregation companies. You know, they go and buy mortgages from other banks.
I seriously think they have no idea what this property will really sell for. That is why it is still on the market 6 months later.
I intend to use all my tricks to make them realize the true value since they will not fix the few issues preventing a conventional loan.
Property Pictures
Is that not THE perfect area to store and work on my eBay listings? To me, it is the absolute ideal place. A HUGE garage that is begging for shelves and a nice air conditioned office to list and then write Steemit posts.
I could easily buy pallets of store returns and have plenty of processing space and storage to do that type of work.
Conclusion
I have completed my application for the FHA 203(k) loan and the mortgage broker is saying everything looks excellent. Of course it is, I ran all the numbers myself beforehand.
If the owning bank is willing to be reasonable about the price of a distressed asset, I will buy it and have everything fixed for a few thousand dollars.
So if I can get them down to around $250,000 I can fix it for a few thousand more and have a property worth in the upper $300's. Instant equity of around $100K.
I already hear the bitching though. It seems no one knows the rules of a 203(k) mortgage. I asked around the office, one broker said he did one 203k in the 17 years he has been a broker. I will have to educate them.
It's silly that a rookie like me knows more about these things than people who work in the industry.
Maybe I should resell on eBay AND be a real estate agent specializing in getting people into homes using all available methods. Hmm...
P.S. Anyone want to use the Zillow link and run some comps? I think a crowd sourced effort would yield excellent results.