What Would You Do With This Deal?
I've found a 2/1house with a 1/1 "in-law" house in the back. Working the numbers, it will cash flow $250-$300 at the current asking price. This place is located in a nice, quiet blue collar neighborhood. We're very impressed with the neighborhood actually. When we drove by the house looked like it needed a little sprucing up. So far everything is looking A-OK.
Here's the situation though: our agent contacted the selling agent and the guy only talked about the 2/1. The current tennant has lots of pets and doesn't clean up after them very well so the house smells like pets and their 'business'. The selling agent was really talking bad about the place, so much that my agent was surprised at how bad he was talking about it while being responsible to the seller. As you can imagine this has been sitting on the market for awhile.
We haven't gone to walk through the property yet as my agent is nervous about it as an investment. I'm thinking that since there are tennants there and you have to schedule a viewing with the selling broker, he's putting in a lot of work for no pay on what he thinks is crappy property :-D This might be a perfect opportunity. Asking price is $75k, owner is an LLC and they paid $50k in 1999. I feel that there would be a good chance at getting this property for $60-$65k. As I stated earlier, it cash flows nicely at the original asking price.
I think I'm going to schedule a viewing later this week, I'll practice my wincing and disgust for in front of the agent and try to find out more about why the sellers are selling etc.
Would you purchase this or would you walk away?
If you purchase this, would you keep the guy with the pets there as long as he was paying rent or get him out asap? I'd have to make all the effort to get the smells out now or later, is it better to have more rent or get him out now to prevent more?? So far they just talked about the smell, not about damaging the property in other ways. Any quick/easy/cheap ways to get rid of pet smells?
The same LLC has another 3/1 and 1/1 'inlaw' that cash flows $350-$400 for $85k that I'm more interested in but I keep thinking if I make 1 offer for both I can get the package for a real nice price(I'm thinking $130-$140 range) and push the cash flow to the $800-$1000 range.
These would also be my first rentals but I have been rehabbing our house so repairing the one won't be a huge problem for me.
Thanks in advance, can't wait to hear your opinons and experience!
I would definitely lower the price on the stinky house, it will take a lot to get the smell out if the dogs smell that bad. Also if they live like that you can also bet on them not taking care of general maintenance.
I would have the seller lower the price on that and offer to take all of his properties for a discount as well. I would also ask if he has any other properties that you could buy, as he may just be selling his problems and holding out on the good stuff.
As far as cleaning goes, Look into the price of a rental for an ozonator, new carpet, paint (maybe Kilz as a base layer), window treatments, and chemicals to get rid of the smells and you will see that the potential cost (and discount you should get) of cleaning that up could get expensive. If the house is on a concrete slab then the odors may not seep through, but if it is a wooden floor then you will have a fun time getting it out of the wood, sometimes I have had to replace sections of the floor due to rotting out where the pet has done its business over a couple of years.
I would also start raising the rents as soon as possible on the stinky tenants to get them to move, or start bankrolling money from the increase for when they do move. Make sure to get whatever deposit they gave at closing, as well.
In short though I would buy it regardless, if the cash flow is as good as you say, but at a lowered price for the cleanup.
Good Luck,
Kyle