What To Do With This Property?
I found a property that I don't think is being advertised beyond the FSBO signs. I'd like to know what the board thinks...
3BR/3BA "tri-level" that's 2300 sq ft.
The owner is a widow who's already moved to a smaller house, and is now making two payments.
She says she is asking 145K (it's in a decent neighborhood, but this is not a metropolis), which she came to from the selling prices of similar homes close by. She spent several minutes before and after giving me that price telling me how it's not a hard number and she is flexible.
No matter how flexible she may be, I can't make the payments on a 100K+ house, make my own payments and feed the baby.
I'm thinking about trying to talk her into an option for something less than what she's asking and trying to find a buyer.
The rental market for a 3BR I believe is under 1K.
What would you do?
Andrew,
Congrats on finding one, but you need to stop focusing on why it won't work and see how to make it work. You've said that you can't make the payment if it is empty, but what is the rental market look like? Can you rent it quickly?
Plus, there are other options:
Change the zoning:
Can this 'tri-level' be converted to 2 or 3 separate units? How much would a 1BR/1BA rent for? Is there a way to add separate kitchens for each?
Sell it:
Are houses selling there? Can you do a better job selling it than she can?
Rehab:
Are people fixing up houses and selling them for more than $145K?
Also, she says the price is flexible, which sounds fairly motivated. Were the other houses sold through realtors? If so, there is 6% off the price. Deduct repairs and upgrades needed, plus a few months of payments and you may get her to see that it is worth less than she thinks. If she hasn't done the kitchen lately, that's $15K off the price and you can put in a new one for $5K using stock cabinets.
What about seller financing? If she and her husband owned it for years, she may not owe too much on the mortgage. Would she let you use her mortgage (buy it Subject 2) or L/O to you?
For example: she owes $50K at $500 per month. You buy it for $110K and pay her mortgage until you sell it or refi it in 2-3 years, plus give her $200/month towards the $60K second mortgage she holds. She may even let you delay the first payment for a year. You then L/O it for $1000/month with an option at $150K for your tenant in 2 years.
The results:
She sells today, no more monthly payment, and she gets $200/month for a couple years, then ~$60K when you sell. You make $300/month in CF for a couple years, plus you depreciate the house on your taxes, then you get ~$40K when you close with your buyer.
What to do now:
Look at her house and check for repairs needed, etc. then check the comps and do the numbers carefully and come up with a price. Meet with her, show her how you came up with that price and see if she'll go for it. Get it under contract, market it, sign up your renter//buyer, close with her, then do it again.
Good luck
Peter