Need advice with investment opportunity

[xmanz3]

It's being a while since my last time around the ER board, but now I am back in the states after a long 3 months trip in South America. Things have change a lot for me and I need your advice. My last day at work was January 2nd, but my last pay check will be on February 1st. My wife will start working on Monday as a Real Estate agent (commission only) while I keep applying for jobs all over. Financially speaking, our emergency funds will last all throughout 2008.

I've been thinking of ways to make money until I get another contract or find a job with the Federal Government. I like Real Estate and even though the market has suffer a big hit, I believe in my area (Atlanta) is still a good buying and rental market.

There is one condo that I purchased almost a year ago near where I live and back then I paid $142,000. Since my wife is a Real Estate Agent I went to the FMLS and I found only 2 condos for sale at $147,000 and $151,000. During the last 12 months the average price on the condos that sold were in the $145,000 range. There is this condo for sale that is in Foreclosure at a price of: $119,900. All condos in this neighborhood are 2 bedroom, 2bath, fireplace, nice size kitchen, balcony, storage room and total space is around 1200sqft. So I am thinking on making an offer for $100,000 and spend around $5-6k on making some upgrades (bathroom, kitchen and flooring) and get it all done in 2 weeks. Then, we are planning to list the property for $139,999 and if everything goes well I could make around $35,000 of this deal.

Now, as far as financing on today's market they can only finance 90% so I would have to put down 10%. I am planning to use a Bank of America CC that I have and they currently have an offer of 0% for 12 months. If the place does not sell in 2 months, we either lease the place to own, rent the place, or we might even move in since I have my primary residence in the market for rent.

I would like if possible for some of you to shed some light this way.

[P.S.]

Just to clarify...

you want to buy the condo with 90% from the bank and 10% from your credit card?
how are you planning to pay closing costs?
what if the unit doesn't sell in 2 mo, and when you move into this unit...your tenant moves out of the other property and you can't find a tenant for awhile?

[Want2retire]

Is this your first real estate "flip", in what may be the worst national real estate slump in history?

I would rather just hold a gun to my head. It's over more quickly that way. This is my honest response, though take it with a grain of salt since I don't know anything about your local real estate market. Maybe, as you say, real estate is doing really well in Atlanta.

[xmanz3]

I will use the CC at 0% for 12 months to put the 10% down payment.

Seller will be paying for the closing costs.

I will have to do a good screening to avoid any complications and also I will required a 2 months security deposit that they will lose if they breach the contract.

Also, if the unit doesn't sell and we move in, we will keep the condo in the market until we find the rigtht buyer.

Originally Posted by P.S.

Just to clarify...

you want to buy the condo with 90% from the bank and 10% from your credit card?
how are you planning to pay closing costs?
what if the unit doesn't sell in 2 mo, and when you move into this unit...your tenant moves out of the other property and you can't find a tenant for awhile?

[REWahoo]

Xman, residential real estate in the US has a virus. Places like Atlanta may not be showing many of the symptoms of the disease just yet, but odds are the infection will spread.

With your wife also tied to real estate for income, I'd concentrate my efforts on finding a paying job rather than put all my eggs (plus some borrowed ones) in one basket.

[xmanz3]

Good point. But I can see some potential in this property since I could purchase the unit for $50,000 less than the last unit that sold at this place. Even if I walk out with $25,000, that will be a good profit with my current situation.

What do you think?

Originally Posted by REWahoo

Xman, residential real estate in the US has a virus. Places like Atlanta may not be showing many of the symptoms of the disease just yet, but odds are the infection will spread.

With your wife also tied to real estate for income, I'd concentrate my efforts on finding a paying job rather than put all my eggs (plus some borrowed ones) in one basket.

[REWahoo]

Originally Posted by xmanz3

Good point. But I can see some potential in this property since I could purchase the unit for $50,000 less than the last unit that sold at this place. Even if I walk out with $25,000, that will be a good profit with my current situation.

What do you think?

I think it's a real crap shoot.

The reason for my pessimism is what I saw happen in the S&L mess in Texas back in the 80's. My brother bought a condo in a decent area of Dallas as a place for my niece to live while she went to college. Got it at a real bargain, about $0.65 on the dollar if I recall correctly. When she moved out 4 years later he couldn't give it away. Rented to a series of tenants who trashed it. Ten (10) years after he bought it he finally unloaded it, but had to take a check to closing.

I know, this time it's different, but...

[GatorBuzz]

How long are these condos generally on the market? Have you researched that yet? That would be big determining factor for me.

Also, are you planning to do the sweat equity yourself or pay subs to do it? Two weeks is not very much time at all, despite what "Flip That House" would have you believe. I'm not trying to be condescending, but I have done extensive remodeling personally and my dad, uncles and brothers are all construction subcontractors. I have seen some nasty situations that homeowners have gotten themselves in.

Also, don't forget about the taxes that are due on the capital gains. That will severely eat into your profit.

Have you thought about, if you've lived in your current home for two years, selling your current house and using the equity from that to purchase this foreclosure (or another one)? Fix that up, live in it for two years and then repeat. You will pay no taxes on the profit this way.

I will say that you do have a huge advantage with your wife being a real estate agent.

[Achiever51]

This makes me nervous. Lots of assumptions, but what if the pieces don't all fall into place as you're hoping? Do you have sufficient assets (i.e., emergency funds) to pay all the bills?

If the housing boom was still booming, I'd probably feel a little better about your plan, but if you were my spouse, there'd be a lot of pillow talk going on about this idea as I don't think I would sleep well knowing my spouse was looking for work and I was working commission only. JMO...FWIW.