what to do on POSSIBLE FIRST deal?

Question

I have a motivated seller. Owes 25K on the property. Has 3 yr tenant paying $400. Should I offer him how much he owes to get it off his hands and sell to buy and hold end buyer? Says that house nas hew carpet and new paint new roof from 3 yrs ago. THOUGHTS? SELLER isn't interested in sub to.

Patrick L. · Answer

Junior Salters If the seller is out then I guess none of this really matters but I think with rents so low compared to the value the only money to be made is if someone could do a light rehab and flip it to an owner occupant.  With costs that spread is still too thin for that so I don't see a deal for a wholesaler (if you were the rehabber you might be able to swing it on those numbers).  I don't see how anybody could make any money on a house that rents for $400.  With rents that low on a single family home your costs will often well exceed the 50% rule (it costs the same to do most repairs whether the house rents for $400, $800 or $1500) so your monthly income can quickly get eaten up.  Personally I won't buy a single family home I can't rent for at least $700 because (and I generally buy those for under $20k).

Junior Salters · Answer

Seller backed out, decided to keep it for themselves. All in all, probably good with how skinny the deal would've been for my end buyer. Thanks for your insight Patrick L.

Junior Salters · Answer

Patrick L. Market rent is around $400 in this area. but I see what you're saying. Even with a 32K sales price, I though payment was supposed to be 1.25% or does it have to be the 2%. MArket value shows 55K and I did pull comps

Patrick L. · Answer

How much is the market rent for the property?  At $400/month that's a pretty weak rental when you figure the overhead, taxes, insurance and maintenance involved in it so without a rent increase I wouldn't buy that unless somebody was giving it to me.  New carpet and paint from 3 years ago are no longer new and have no value at this point.  What's the current market value of the property?  Have you looked at comps in the area?