In contract with my first rental property

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My husband and I are in contract with our first rental property in Deland Fl. Home inspection has my husband wanting to get out of contract. The home does not have insulation in the attic. Cost is  $1500. Plus some other repairs such as leaking fridge, floor tiles loose, some outlets not grounded, doors don’t open and close properly. The seller paid 50k 1 year ago and did some handyman updates.  The house is currently rented at $1,000 a month. Sale price is $87,500.   I think it’s still a good deal. Would love some feedback from anyone on whether this is a good deal. 

I agree!  I'd put the money into it to adequately maintain the house. Depending on the rental market, you may be able to make few improvements and increase the rent, but you're already at or above 10% without doing so, so it looks like a win either way.

@Joni Martin talong the piling on your first property is very intimidating! Good for you guys for being on your way! The inspection issues you shared seem relatively minor when considering what could be wrong with a given property. If you’re planning on doing the work yourself, try to calculate the materials needed and time you’ll be investing to determine if the deal still works. Build in a buffer for costs overages, as their will more than likely be a few... Add that number to your purchase price, plus an additional month of vacancy and then calculate your cap rate or return rate. If you can still achieve your starting goal, then it’s still a good deal. Best of luck!

Yay...got him to see the light! :). Still very scary because it is our first one. We are ready though, well...I am ready I should say. It's been a year of preparation. We have a series LLC setup which cost a lot of money and has not been utilized. I'll keep you posted. :)

@Joni Martin I wish I could find a deal like that :)! Those are minor things. As a handyman myself the items you mentioned are all something an experienced handyman could take care of. I just added insulation to my own attic several months ago and it ran me about $700 for a 1100 sq ft home. These were bats. If you guys are willing to give it a world you could also blow in your own insulation by buying it at home depot and they may even throw in the blowing machine for free. Congrats! My wife and I are still looking for our first deal to. 4 offers so far but no deal. Enjoy the journey!

Congrats! Do you think maybe the seller would help out with the cost of repairs at all? I read an article on BP the other day that discussed negotiating repairs. 

1.) Get a VERY detailed inspection report. (maybe 100 issues or so)

2.) Pick out a few issues that you would like seller to fix. 

After seeing a 100 line list of issues the seller just may be ok with fixing a few. Within this "few" could be insulation in the attic. 

just an idea... 

I also just got my first deal under contract. My home inspection is next Tuesday and it feels like NEXT YEAR!. haha... good luck, keep us posted!

Congrats on the contract Joni!  You will find that both values and rents can fluctuate widely in DeLand depending on location, sometimes a block or two can be  a difference of a couple hundred a month in rent.  If the area is prime that should be a nice return on investment for you.  We are renting homes before the previous tenant vacates and the shortage of quality rentals in desirable areas is severe.  Best of luck to you!

Hi Marcus, I did ask the seller to pay for some of the cost or reduce the price however, she has stated that she will not do so and property is sold as is.  This was not stated originally though.  She paid 50K for this property one year ago and was originally asking 106K.  It appears in that year she has made it livable enough I guess, as there are tenants paying $1000 a month.  It seems unheard of not to have insulation in your attic here in the Florida heat.  Other problems are that the refrigerator leaks. The tenants put a towel down to soak up the water.  Seems like that should have been addressed already.  Plus,  there are other safety issues...not major however, need to be addressed.  

She may have already reduced it to below market so she's not willing to budge.  I would ignore the fact that it shows she purchased it for 50k, that's really irrelevant.  Just look at what the home is worth now, and if it works with your numbers.  A fridge leaking and missing insulation are really very minor things if those are the main issues and shouldn't deter you if the deal looks good.  Just buy a new $600 fridge if necessary and get some insulation put in, and you'll be good to go.  

I would make sure to take care of the non-grounded outlets and any other electrical problems ASAP.  Check that you can get insurance on the property and what they require.  I just got a cancellation notice because of the brand of breaker panel (Challenger), so have to change to Square D or Siemens, which was an expense I didn't foresee.  Call for estimates on blown in insulation as some companies do it at almost the same cost as you doing the work yourself.

I am in my third month of owning a rental property. I had to purchase a new refrigerator, but I knew that going in. I am in the process of looking for another property in Deland, Florida.  Not much out there for my price range as I am a new investor.  Has anyone heard of Limitless Turnkey?  I was considering purchasing a property from them.