Hi All,

Wanted to get some peoples thoughts on a potential deal in the Niagara Falls/North Tonawanda area of Western NY.

1300 sq foot duplex currently rented and both tenants under lease

$550 upper , $700 lower

Seller is an investor looking to divest of the property. Currently owes $64k on the property and is looking to get ~$100k for it. Here are the numbers

Gross Rents $1,250

Property Taxes - $300/month (slight overestimate to be conservative)

Vacancy - 8% - $100/month

CapEx 8% - $100/month

Landscaping & General R/M - $75/month

H20 - $65/month

Insurance - $75 month (estimated)

i already know at current rent levels the numbers arent very good. But Seller said he may be willing to hold 2nd mortgage if down pmt is sufficient. So could i do something like this?

Assessed value is ~95,000

Offer $87,500

75% LTV investment property mortgage for $70,000 - $400/month pmt

Owner Holds $15,000 2nd mortgage 15 yr amort. with 5 year balloon - $135/month pmt (total interest pd 4,800 in 5 yrs)

I kick in $2,500 or so of my own cash so the owner ends up with around $7,500 cash after his note is paid off

my numbers would be awful for 5 years but i could stash away as much as i could during that time and after the seller 2nd was paid off I would have ~ $25k in equity that barely cost me $10k out of pocket...

thoughts?

If you're going to give money away please send some to me!  I would offer a number that makes sense, not what they want to get for it.  I think they know they can't sell it for $100k so they are trying to unload it to a sucker (you). This might only be worth $65k to meet a 2% rule.

You definitely have a point. No doubt the number I came up with is way off the 2% rule at current rent levels. But rents are a little low for the area, could probably get another $100/month across both the units once current leases are up. The part I don't agree with is how easily they could unload this property if motivated. He was doing a lease option with the prior tenant at $112k and had it fall through after it was already in motion. 

There are hardly any comps for duplexes in the area (all SFR's and some nearby 4-plexes renting for around $800 for a 2br) but looking at the neighborhood Im thinking full market value is around $95k. I came up with the $87,500 number because the property is already rented so there is no rush to sell, I believe he would only do a deal if he could walk away with a little cash.

@Chris Lofstrand Sorry, but this is not a deal (that I would do) at that price unless you can bring rents way up or the purchase price down.