Would you buy?

Question

Hi all,

I'm new and just getting my feet wet. Found an interesting property that is currently rented and the seller just wants out of it (tired landlord).

4 bedroom single family. has a tenant that has been living there for 3 years and really does not want to move, her lease is up in Dec. 2015 and is currently paying $670 per month.

Seller has a mortgage  and pays $329 monthly. asking $33K and according to the county assessments and comps FMV  is around low $50'K.

Any thoughts on ways to structure, or things to look out for.

Thanks in advance...

Anil Samuel · Answer

@Mik Scott  I would look at the current leases, utilities, and any other documents the seller may have so you can perform further due diligence.  Verify their taxes are paid up to date and there aren't any liens on the property.

Michael R. · Answer

How old is the house?  How old is the roof, the water heater, the HVAC?  There must be a reason it is below market -- why else would someone dump a cash flowing property?

Hire an inspector, have the sewer scoped - and set the inspection up for a day or so after a heavy rain to check for water anywhere.  Run the numbers on the calculators on this site and know your numbers.  If you don't have financial criteria -- this property is a good one to start developing those on.  All the best.

Jim Viens · Answer

I'm fairly new to REI myself but one question that jumps out at me immediately is, how does the current rent of $670/mo compare to market rates? Also, does the property need any work now or in the near future? (Roof, mechanicals, etc.) $33k may sound like a decent deal now but if your long-term renter decides to change her mind you may have a $15,000 rehab to do before you can rent it out again...and if the water heater or furnace goes out at the same time...ouch.

Account Closed · Answer

No, don't buy SFR properties with existing tenants.  You'll be spending lots of money to deal with the prior investors problem tenants.  Average eviction cost is about $5K.  It's enough to ruin your year.

Would you buy?

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