Condo's and Questions

The condo thats being forclosed on is in a decent neighborhood and looks to be in good condition. It originally sold for $117,000 in June of '04 though the assesment with the city values it at $97,900. It has 4 rooms, 2 bedrooms and a full bathroom. This one story condo was built in 1988.

According to a Mortgage Calculator the payments on a 30 year mortgage for $117,000 at 5.5% come to $664.31.(Far less than the average rent in this area which always makes me mad. If I can pay a higher rent why wont they give us poor people a mortgage?) Figure over the two years the guy has owned it he paid in roughly $15,000, maybe half of which went towards the principal. Thats just a guess since I've never had to figure these things out before. The attorney handling the forclosure on behalf of the mortgage holder couldn't tell me the balance. She did say however that this was a first mortgage and looked "clean".

I talked to the city tax collection office and the taxes are paid and current with the next quarterly payment due in October for $275.

So what do I have?

Just to bid on this property I need $5,000 cash or certified check. (The attorney did say to have the check made out to myself, if I won the bidding I could sign it over, if not I could redeposit it into my account.) Thats not a problem, I'm sure I could come up with that. What worries me is competition from other bidders, that and I'm not really sure how much of a discount this auction will give on the purchase price. Do I go in looking for 25% off the original purchase price, or the assesed value or what? And are there any other fees?

That means getting pre-approved for a mortgage amount. Thats my next step. Not really a creative financing idea but hey, baby steps. And do all mortgage companies do condo's? Maybe I'm being overly pessimistic but wouldn't it be like a trailer home where you don't own the underlying property? Also I'd like to find other homes being forclosed on and their assesed value and purchase price and see what they go for at auction. Maybe even interview one of the bidders.

So there are two things to do in the next couple of days.

What would I do with the property? Besides live in to have a place to go I could easily rent it out. Figure a mortgage payment of $650 plus extras like insurance and taxes, it still wouldn't come close to the $850 or so I could get in rent resulting in a positive cash flow. Thats rather simplistic but may be a possibility. Maybe do a lease with the option to buy or a no money down deal for the buyer where I increase the payments above rent levels and they work towards paying it off?

Who knows?

Just as an aside; I emailed both Robert Allens official website and The Robert Allen Association which handles post graduates of the Robert Allen Institute about my blog and being inspired by The Challenge. I asked to be put in touch with any graduate from Rhode Island or Southern New England so that I could interview them about their successes, and about their personal struggle in becoming a real estate investor.

No word back yet. But with any big company these things may take time. Besides which its almost the weekend. If I dont hear back from either one by next week maybe I'll shoot 'em another email or give them a call.

Which reminds me of one of my other "lines". I have two ideas for ads to be put in the paper. One which I will probably be submitting on Monday will go in the real estate section and will read something like, "Budding Real Estate Investor seeks like minded individuals. Been at this for years or just bought a No Money down Course from an infomercial? I would like to hear your story." That ought to give me a good cross section of people, from experienced to inexperienced. Most likely newbies but hey, gotta start somewhere.

Infomercials and Self Doubt

I couldn't sleep the other night. In part thinking about all the work I need to do on this blog. About the enormity of the task ahead of me, finding a house within a year with little or no money down, my current poor credit rating envisioned as a stumbling block. Never mind that like most Americans these days I had very little savings put away. I thought of how little definitave information was in The Challenge and how much more research I had to do.

It was then, mindlessly clicking through late night tv that I saw something I hadn't seen in years, channel after channel of infomercials. Most were real estate oriented, the Carlton Sheets and Russ Whitney's, the forclosure guy and the cash flow guy. But there were otheres, stocks, wholesalers looking for you to sell direct using their catalog, and one that didn't say what it was, just a girl leaning forward with her cleavage saying you should call this number to make tons of money in only a couple of hours.

Selling hope.The question was were they making money off of their books and courses or had they really "done it"?

I remember my mom buying a set of tapes and some books from Carlton Sheets, when was that 1994? 1998? What had ever happened to those? Did they get read, did she ever try to put them to use only to find the techniques fell short in the real world?

The question began to nag away at the back of my brain, "what if I had set myself up for failure?" What if I had started too soon, posted before my blog was picture perfect, made a comitment based on a happenstance finding of a 20 year old book in the library that caught my attention. Would I be better off at the Blackjack tables?

The problem is that I am commited now. I want to know, probably like many other people that watch these late night infomercials. Is this for real? Or are they just good salsemen? If I had half of what some of these people charge for their introductory set of books and CD's I wouldn't be in the predicament I'm in now.

Back at work at my crappy job I wonder, couldn't I imagine a more inspired destiny for myself?

During a lull I flip through the paper to look at the outrageously priced homes. Nothing that remotely sounds like the ads from the book. Maybe I should call the few ads offering to buy houses for cash and see how they do it. The book said keep five lines in the water at all times. I flip through the forclosures and notice one not to far from where I used to live, a condominium. Has to be cheaper than a house.

I take out the ad and decide to check the property out in the morning after work.

What other "lines" can I throw out there?

The Begining

It started out of necessity. The Owner of the apartment building I had been living in for the last 6 years decided he didn't want the hassle of having tenants anymore. He was selling and I had 30 days to get out. Six years in one place was the longest I had ever lived anywhere in my whole life. Thinking I had secure housing made me grow complacent. Instead of looking for a place to call my own all those years I had been helping him pay off his mortgage.

My Mother was in the same boat. She lived in a different apartment in the same building. We decided to go in together on a mortgage for a place that could be our own. She found a real estate agent from a major company that advertises on tv and he showed us a couple of multi family homes. They were run down and in need of serious repairs. Then he showed us one that looked good and had reliable, quiet tenants. It was at the top of our price range, higher than I wanted to go but we decided to move forward on it. What the realtor forgot to mention that he was the sellers broker for this particular house. When asked weeks later he admitted that he was the sellers agent but failed to provide us with a disclosue form.

By then we were already having problems. The original Mortgage officer "went on vacation" and never returned. This is what we tell people at my job when they get fired. The new mortgage officer was having trouble figuring out how he qualified us for so much money. The realtor stepped in and somehow convinced them to go ahead and give us the money for the house. He really wanted this deal to go through.

The inspection revealed several major problems. Some of which like the driveway needing work were obvious, but others like the electric wiring not being up to code weren't. We wanted the wiring upgraded throughout the house before we would go through with the purchase. The owner didn't want to do it. The insurance people I talked to said they wouldn't be able to insure us they way it was in the inspection report.

While we were going back and forth over the various repairs needed I noticed something on some paperwork my mother had in a folder. Each time the price of the house was written on a document it was a little higher. On the last one it was just $500 shy of the sellers original asking price. The broker had no answer when I asked him about it and became evasive. The owner was still unwilling to do the repairs so I told them the deal was off.

My mother still felt like it could work so I called the mortgage company and told them that there was no way I could co-sign on the house. I thought that without me the funding would never go through since with both of us they had a hard time approving the loan. But somehow, even without me on the mortgage the realtor convinced them to keep the financing in place.

After explaining the extent of the problems with the house, the real cost of the mortgage payments, and what I saw as shady behavior by the real estate agent my mother decided she didn't want to go through with the house either. When she informed the realtor he threated her, told her that she could get sued and various other threats. Its was only after days of standing her ground that he finally calmed down. Eventually I even got my deposit back.

This episode, despite my need to find new housing, soured me on the idea of purchasing a home. For almost two years I had been trying to clean up my credit. I had one major negative mark in the form of a credit card I co-signed with my sister 6 years ago that was never paid off. I had been doing what I could to add some positive credit history and putting money away for what I hoped would be a down payment on a home.

But time was up and I had to be out. All of my stuff went into storage and I moved into a trailer in my friends backyard.

I gave up on the idea of home ownership. That is until a book came across my path that made me wonder, The Challenge by Robert Allen. In the book the challenge is for him to take someone from an unemployment line and teach them to close on a house with no money down and have $5,000 in the bank within 90 days. I wondered if it was still possible in todays real estate market to do what they did. I wondered where those people in the book are now and if anyone else was doing this.

I decided that within one year I would close on a home with no money down. Thats my challenge. I give myself a year so that I can research wether people are still able to do this in todays real estate market. Also because I am alone in this and have a lot to learn, and it gives me some more time to improve my credit. Though they didn't need that in the book I would think it would make it easier to succeed. Hopefully it wont take me a year.

So I started this blog as a way remind me to work towards home ownership, hopefully with no money down, as a way to make contacts and share information with those looking to do the same thing. Also I want to make it clear that I have no affiliation in any way with Robert Allen other than having read the one book. I am sure I will read more of his and other books suggested in The Challenge.

Also this is not an Infomercial, I dont want to sell you anything. I want to share my experience and network with like minded individuals. Thats it.

With that welcome to OwnAHomeWithBadCredit.com