Rookie question: If cashflow is so great, why is it being sold?

2 Replies

I haven't made my first deal yet, but I found this AMAZING house.  Okay it's an awful house, nearly 100 years old.  But I can pay cash for it and it already has 100% occupancy.  I'd have said cash back in 4 years...OK 5  6 7 years because I'll have to fix a few things here and there, but then I will have my money back and cashflow literally beyond anything I'd imagined before.  We're talking FOUR figures here, and not just over that $1000 threshold either.  (I played Robert Kiyosaki's game; a property cashflows like $200.)  

So...why is this even being sold?  Why would an owner divest himself of such a figurative gold mine?  

I guess I'm really asking you what the hidden traps are in such deals.  An internet ad isn't going to tell me what to watch out for.  So, other than "why is the seller selling," what should I ask the realtor, and what traps should I be weary of?  

(If you're interested, after the showing I can post what I learned here for further discussion and educational purposes.)  

landlords sell for all sorts of reasons.

but first and foremost homes that can pay themselves off in under 10 years from cash flow are generally going to be in rougher or less desirable areas or poor income areas.. so thats one thing.

Landlords get burnt out.. I know I did..

people get sic they pass  they move to Thailand   they move to Florida or Arizona and just don't want to fool with it anymore.

don't get focused on Sellers whys.. just understand the basics of that area.

do your due diligence get a good home inspection there could be some major underlying structual or other issues that are forcing the sale.. 

when most people of middle age need money its for only a few things.

1. pay for wedding or collage 

2. down payment on house for kids.

3. Medical

4. want a second home

5. bail out and pay for kids criminal attorney.

People sell properties like this all the time for many many reasons. Freeing up money, getting out of real estate, divorce settlement, bankruptcy, etc. 

Knowing the sellers "why" is great but if you cant use it for leverage in negotiations than all you can do is cover yourself in the due dili phase. Do you inspections, run comps, talk to your agent about everything, bring a contractor through, and most importantly run worst case scenario numbers....if that number is something you can stomach then you are good to go. 

If the numbers work, go for it. If they dont, put in an offer for the number that makes sense to you. If they dont take it then move on. 

Trust, but verify everything the seller says. Sellers fudge numbers, property conditions, and their stories all the time. Take whatever they say with a grain of salt and do all of your homework on the property. Thats the only way to be sure of the property and what you are buying.

Hope that helps. 

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