Contacting a owner of vacant property near my home

10 Replies

I wanted some advice as a newbie. There is a home in my neighborhood that has been vacant for years. I have lived on my street for 7 years. I creeped me out because it was always maintained but I never saw anyone.  Thought some hermit lived in it. The guy that lived next door to it told me an old guy owned it and was saving it for his kids. A couple years ago the daughter (looked about 40ish) moved in for a few months then moved out again.  

The numbers:

  • SFH ~1000 sqft it is probably 3/1/1 or 2/1/1 - this set up is common in my neighborhood
  • Zillow shows home purchased 1994 $47K and ARV $114K. I just refi my home it appraised around that price. Mine is ~1100 sqft 2/2/2 so it is close.
  • It could rent $1300 -1400/ month - my floor plan is on the zillow now for $1395

Gross Schedule

  • Gross Schedule income $15600
  • Vacancy allowance (3%) $468
  • Tax $2200/year
  • Insurance $2300/ year mandatory windstorm coverage
  • HOA $175/year
  • Lawn service $600/year
  • Maintenance $500 year

Total Operating expense: $5775    38%

Net Operating income: $9357

The house is pretty well maintained the appraiser site says a canopy was added on the patio in 2015.  Foundation issues are common in this neighborhood which take 5-10K to fix. 

I think if I can offer $90K or lower or get him to owner finance at a higher price. It would be an awesome rental and easy to manage for newbie since it is close to home. I have access to about $20K cash pretty quick between 401K loan and savings. 

I live in Pearland, TX a suburb of Houston, TX. There is tons of growth and business investment in my area. 

His name, address and number is on 

 On our personal finance we have gone frugal to pay off debt in about a year.  I can stop accelerated payments at any time and free up a good bit of cash. Should I contact him? If so how should I approach it?  Do you think I should wait?

@Ricardo Murph II

Good questions. If you decide to borrow from the 401k see the following IRS link which covers the rules.

On the other hand if you have enough funds in your IRA or can transfer your 401k funds (provided it is a former employer 401k) to an IRA, you may want to consider investing the IRA in the property as the rules allow for IRAs to hold real estate.

Pearland is a great part of town. I would totally contact him. Ask him if he's looking to sell and ask him what he's willing to take for the property. The property I have under contract ow I asked the seller what he wanted. He said 20-25K. I got it for 15K. If you ask them to name a price then you have a good starting point for negotiation.

You say it is well maintained. But if it has been vacant for years, you don't really know. Hopefully just cosmetic items, but you need to get inside and see before you even think about making an offer, IMO. If you are buying at 90K, +10K foundation, +closing costs, you are now only about $10K from estimated ARV. That is not a lot of cushion to do the interior, paint, flooring, kitchen, bathroom rehab if needed. AC units? All that said, yes, you should contact him. He is bleeding taxes every year, maybe will take less where it can work.

@Mark Nolan thank you for your response. I have taken a loan out before and paid it off. to get out of credit card debt. I have a small about in a IRA that I could use for real estate but I would like to try to use it to invest in notes later not so much rental properties.

@Simon Shih That is good advice.  They say the one who speaks first loses in negotiations.  I have forgotten that in my excitement.  

@Tom Cooper you bring up all good points.  I am making a lot of assumptions for a vacant house.  I do need to see it and factor in the big ticket items that deteriorate when not in use. Water heater, AC, outdated kitchen and bathroom. Maybe these problems along with age is why he never sold it. Thank you for your feedback. 

Hi @Ricardo Murph II I agree with Tom Cooper in regards to the issues that the property may have, it seems that a property deteriorates faster when unoccupied then when it is occupied; however I to think that you should definitely contact the owner.

@chris purcell I was praticing my property evaluation. I feel the more I practice running the numbers the faster and better I will be. I had great input from others. I believe learning is a big part of investing. Fyi if you read the post you would know I had his number, I called and got a response.