Would you buy an overpriced house if they are willing to finance

11 Replies

Would you buy a 100k house for 130k with owner financing? If the rent will cashflow 200$ a month, would you pay more for the property to get that cashflow?

@Fili Aguirre Like most things, it depends. If you got it at 0% interest then probably.

Depends on size of downpayment necessary/capex needed/exit plan/hold period/etc.

Post the details and could probably help more.

No. Not because you would be buying it for $30k higher than ARV. It's because I wouldn't buy a rental property and only get $200/month in CF. The interest rate doesn't matter, as long as I'm getting at least $350-400...depending on how much (in dollars...not percentage) I put in as a Down Payment.

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@Account Closed  What do other properties look like?  If it cash flows $200 a month, it would have to be a really good deal to pay $30K more than it is worth.  At that price point, you'd be paying 30% more than it is worth and even if all the cash flow went into your pocket, it would take almost 15 years for the cash flow to pay for it.  That is assuming all the other properties you're looking at had no cash flow.

Personally, I wouldn't do it.  You make your money when you buy the property.

Originally posted by @Theresa Harris:

@Account Closed  What do other properties look like?  If it cash flows $200 a month, it would have to be a really good deal to pay $30K more than it is worth.  At that price point, you'd be paying 30% more than it is worth and even if all the cash flow went into your pocket, it would take almost 15 years for the cash flow to pay for it.  That is assuming all the other properties you're looking at had no cash flow.

Personally, I wouldn't do it.  You make your money when you buy the property.

 Not true.  If he's positive CF, then the Tenant is paying for it...not him.  The only thing he's paying for is the Down Payment...which he has not stated what it is yet.  I wouldn't do it just because $200/month isn't enough cash flow on any deal.

Originally posted by @Joe Villeneuve:
Originally posted by @Theresa Harris:

@Account Closed  What do other properties look like?  If it cash flows $200 a month, it would have to be a really good deal to pay $30K more than it is worth.  At that price point, you'd be paying 30% more than it is worth and even if all the cash flow went into your pocket, it would take almost 15 years for the cash flow to pay for it.  That is assuming all the other properties you're looking at had no cash flow.

Personally, I wouldn't do it.  You make your money when you buy the property.

 Not true.  If he's positive CF, then the Tenant is paying for it...not him.  The only thing he's paying for is the Down Payment...which he has not stated what it is yet.  I wouldn't do it just because $200/month isn't enough cash flow on any deal.

The tenant is paying for it, but unless he holds onto it long enough for the tenant to pay the entire mortgage, he's still banking on it appreciating to $130K or him finding another person to buy it above market value. 

Originally posted by @Theresa Harris:
Originally posted by @Joe Villeneuve:
Originally posted by @Theresa Harris:

@Account Closed  What do other properties look like?  If it cash flows $200 a month, it would have to be a really good deal to pay $30K more than it is worth.  At that price point, you'd be paying 30% more than it is worth and even if all the cash flow went into your pocket, it would take almost 15 years for the cash flow to pay for it.  That is assuming all the other properties you're looking at had no cash flow.

Personally, I wouldn't do it.  You make your money when you buy the property.

 Not true.  If he's positive CF, then the Tenant is paying for it...not him.  The only thing he's paying for is the Down Payment...which he has not stated what it is yet.  I wouldn't do it just because $200/month isn't enough cash flow on any deal.

The tenant is paying for it, but unless he holds onto it long enough for the tenant to pay the entire mortgage, he's still banking on it appreciating to $130K or him finding another person to buy it above market value. 

 This is true, however my comment was based on positive CF in general, and If you notice I also said I wouldn't do this with what we know, and we still don't know what the rest of the number$ are...like DP, etc...