Lately, there have been a number of inquiries about investing in real estate. Even though there is some frothy-ness going around, be careful!
Below is an extreme example, but demonstrates how quick, and how bad, a deal can go wrong for a participant, in this case the hard-money lender who thought he had equity built in.
12 br/10 ba 16,636 sf
YB: 1993, 1.88-acre lot on lake
SP: $6,450,000 8/29/06
Opening Bid: $5,000,000 8/08 back to bene
Sale Price: $3,200,000
The lender ended up losing around two million dollars, and the new buyer has to spend another $1,000,000 in repairs. The scary part is that the original mortgage that recorded the same day as purchase was $7,125,000, and it looks like in 2007 the owner paid down and refinanced at $4,650,000 – but could it have been a second mortgage? Just a year later it unravels, and lender forecloses.
If you are thinking of buying at a trustee sale, buying a fixer, or “stealing one from the bank”, watch yourself – things can go wrong, very wrong. Assume that there is no “built-in equity” and what seems like a simple repair job usually costs double.