My retired neighbor recently told me that he wants to sell his 50 years old, 1300 SF 3/1 house for around $400,000. The house located in nice South East Whittier, CA area bordering Fullerton / La Mirada / La Habra. It is in pretty good condition and he is the original owner. The comp is about $450,000 in this area. The estimated rent is $2,200.
I am interested in purchasing this property for buy and hold investment even thought it has a slight cash flow. I don't really have a cash set aside for investing. I am can't afford FHA loan since PMI will be will around $350 and it will destroy my cash flow. I have 2 other rental properties with about $200,000 in equity, but I don't think cash out refi is an option.
What do you guys think? Is there a way to arrange a private deal with the retiree and pay him back directly over time if he agrees? or what kind of creative financing would you recommend?
If it doesn't work out for me, I was going to have my friend purchase it as a primary residence. Thanks for your advice in advance!
Welcome to BP!!
This is not a cash flowing property in any way, shape or form.
Your mortgage alone is going to be almost all of the rent. Back of napkin, I'd put this at a $800-$1000 loss each month.
It is a lousy flip as well.
Walk away from this deal, there is nothing worth investigating here. Let your friend have it.
Would your friend be interested in doing a "live-in flip"? Maybe partnering with him on that might be a good deal all-around. He would probably be taking on most of the risk/reward, but there isn't a reason you couldn't get some "sweat equity". Make sure you include a buy-out agreement in your agreement. That way if your friend loves the house and wants to stay long term you can get your money out.
I would recommend getting a price that works for traditional financing for your friend and using owner financing if the owner is a little more flexible - or lower but reasonable rate.
@Aaron Montague @Jesse T. Thanks guys. I took your advise and decided not to pursue this deal. The number didn't work out either.
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