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paintdrying 01-21-2013 05:58 PM

Real estate as an investment
 
Friend of mine is basically waiting for the sheriff to come and move him out of the house that his parents built back in the 1950's. He is going through all the legal channels, bankrupcy, ect ect. My first question is what would be the best way for me to buy the house, it is in Cleveland Ohio. It is worth around 60,000 dollars. After he is evicted will it go up for auction? He is not doing a short sale. Next question, not understanding how to make money off the house. Let s say I got the house for 30,000 dollars total paid in full cash deal. The house needs nothing. I rent the house and after the water bill and taxes I make maybe 500 dollars. So in 6 years the house is paid off. I guess that is worth it right?

beenthere 01-21-2013 06:44 PM

First find out the laws on sheriff sales in that area. Some sales the former owner has X amount of time to come back with the money and get the house back. If you put anything into it, tough luck. And if you have it rented out, you get to find the tenants anew place. So check your local laws.

dougp23 01-21-2013 07:41 PM

Quote:

Originally Posted by beenthere (Post 1098907)
First find out the laws on sheriff sales in that area. Some sales the former owner has X amount of time to come back with the money and get the house back. If you put anything into it, tough luck. And if you have it rented out, you get to find the tenants anew place. So check your local laws.

Excellent advice. Almost any attorney you find in the phone book would be able to answer your questions for free. A decent real estate agent should also know how this works. In my state, yes the sheriff evicts you, but it stops there. The property would then revert to any lienholder (almost always Freddie or Fannie).

paintdrying 01-21-2013 11:16 PM

May not be a bad idea to just sit down with an attorney and see what I may run into. One big factor is, are the big cities going to be where everything happens, and the poor move to the suburbs? This small area of Cleveland is isolated by a very large cemetery. Many people think most of Cleveland will have gone to the dogs in 15 years. I am hoping many areas will come back to life in time.

jomama45 01-22-2013 09:29 AM

Quote:

Originally Posted by paintdrying (Post 1098869)
Next question, not understanding how to make money off the house. Let s say I got the house for 30,000 dollars total paid in full cash deal. The house needs nothing. I rent the house and after the water bill and taxes I make maybe 500 dollars. So in 6 years the house is paid off. I guess that is worth it right?

I can't speak to the first part, but as for this question, I think you're likely being a little too optimistic. "IF" you get the house for $30K, how much can you actually charge for rent? Now, how much of that rent do you think you can reliably collect every month?

The house needs nothing now? Wait until you move someone in who doesn't care, as it's not their house. Not to mention regular mantainence on any home will catch up to you. A water heater replacement will wipe out that $500 profit instantly, for example.

Being that you don't plan to live in the home, you will likely need to take a commercial loan out for the property (unless you have the cash). In doing so, you'll have to ensure that the property will "cash flow". (Even if you don't need the loan, it's imperative for your own sake to make sure the property will cash flow.) What this means is that you have to figure every little cost, as well as a few potential costs averaged out, and weigh it against your potential income. The one thing I would warn, in all established advice I've found about rentals, is that the figure given for occupancy is generally overly optimistic. Most people claim you should only have about 2-3% vacancy a year. I've never been able to get even remotely close to that, so keep that in mind when doing your homework...


.http://www.jacksonvillewealthbuilder...ow-calculator/.......


http://www.kdepc.com/rentalcashflow.html

http://realestate.about.com/od/knowt...al_profits.htm

paintdrying 01-22-2013 02:57 PM

I have been taking to a few landlords I know, they seem to tell me ways to do things. Then they ask what I am going to do when the tenants tear the copper out of the walls. Or the tenants do not pay rent and will not leave for months on end. The taxes are very high in Cleveland. Between water and taxes I am looking at 300 dollars a month. Maybe could rent the place for 800 dollars. That would leave me with around 250 dollars a month after taxes? I think I could keep the place rented, but have absolutely no idea. One of my landlord friends had the place empty for a whole year. He was really stressing over that deal.

harrymontana 03-11-2013 01:32 PM

lawyers and real estate brokers should know most questions, but only related to registred topics. What about if you bought the house and then some plumber comes around and starts to hassle about some unpaid bill?

cleveman 03-11-2013 10:42 PM

I have bought 4 foreclosed homes in the last few years and I'll try to explain how it works here in Iowa.

Usually the person owning the house defaults on the loan. The bank initiates the eviction process and takes over the house. It is offered for sale by the sheriff's office and 99% of the time the bank ends up with it, because they have more money loaned out on it than the market value.

So now the bank has legal possession and they get a realtor and set about selling the house.

You come along and buy the house. If you borrow money, your lender will require that a title search be done. So you or the bank hires an attorney to look over the abstract and see if there is anything that you should be aware of. This is when any liens, etc. are taken care of.

As far as renting the house out, you'll want to look and see what role the government plays in that in your area. If you are in a larger municipality (I believe it's over 20,000 people in Iowa), then there will be some inspection to get a rental certificate before you can rent the house out. Obviously you'll want to check on craigslist and what not and see what comparable houses in the area are renting for, and price it appropriately.

Generally a non-owner occupied loan is for a shorter term, typically 15 years. And the rates are generally higher as well, maybe around 7.5% now. So for a loan of $50,000, you would pay 490 per month @ 7.5% and $440 per month @ 5.5%. The downpayment the bank demands will likely be much higher for a non-owner occupied as well, maybe around 20% down.

Take account of your property taxes and insurance costs. If they amount to $3000/year, and your payment is $440/month, then lets add these to your payment and we come up with $690/month.

henrylarry6 03-12-2013 08:26 AM

Getting and advice with a few reputed real estate agent or attorney can help you with the best options in your state.

harrymontana 03-12-2013 08:32 AM

still creditors can come around and take away their stuff in your garden, or make a hassle if they cannot take it 'back'. What do you think about that?

creeper 03-12-2013 08:51 AM

Harry,

In North America there is a upon purchase, in a real estate transaction, a one time fee called Title Insurance. Before a Buyer actually signs for a deed a title search is done on the property. The trace is done as far back as the papertrail goes and this check is usually performed within 7-14 days before closing. This is to eliminate the opportunity of last minute liens being slapped on the property.

The new Buyer is entitled to a free and clear title. Therefore if a creditor came sniffing around he would be in violation of tresspassing or theft if he tried to lift your garden gnomes.

paintdrying 03-12-2013 09:02 AM

One over looked thing is a huge water bill can be attached to the property. I was reading about a guy in Pittsburgh that bought a house and the city read the water to get an exact reading and billed the guy 38, 000 dollars. I was under the impression that housing was picking up. Employment was picking up. I was thinking to buy houses now before the price goes up. All I hear from people is how bad the economy is. Do none of you people watch the news? Things are picking up!

creeper 03-12-2013 09:04 AM

If the person that bought that house had purchased with a lawyers help then he will not be on the hook to pay that bill

harrymontana 03-12-2013 09:02 PM

Quote:

Originally Posted by creeper (Post 1135295)
Harry,

In North America there is a upon purchase, in a real estate transaction, a one time fee called Title Insurance. Before a Buyer actually signs for a deed a title search is done on the property. The trace is done as far back as the papertrail goes and this check is usually performed within 7-14 days before closing. This is to eliminate the opportunity of last minute liens being slapped on the property.

The new Buyer is entitled to a free and clear title. Therefore if a creditor came sniffing around he would be in violation of tresspassing or theft if he tried to lift your garden gnomes.

Okay, I understand that the seller signs with the statement of a free and clear title. But what if that is not true? Where does the creditor go, or did he already removed his hardwood fences, I don't think so. I once had a sale and the guy went broke, with my unpaid stuff in his garden, then the buyer WAS liable because the fences placed had not been paid and I had a delivered under the condition of reservation of ownership which means that I was still the owner because I had not been paid.

creeper 03-12-2013 09:13 PM

Doesn't work that way here. If you deliver a product or service and the Buyer fails to pay, then you are free to place a lien against his house.

In Canada it works a little differently than the States. In the States the bank will foreclose on your property for failure to pay the mortgage. In Canada when the bank takes your home it is resold as a power of sale. The main difference is that the bank is legally required to resell it for market value. You never see houses sold way below their value.
The bank takes the proceed of the sale and pays the remaining mortgage, then the creditors and if there is any money left the home owner gets it.

The end result is the same however for the creditor. Unless he placed a lien on the property he is out of luck


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