Wondering if I can get a few opinions on this potential purchase?

PP $210k

DP $15k

Required roof repair $15k

Inspection currently taking place this morning so unknown additional repair costs

Current rents $2345 

Owner paid W/S/G & exterior electric $544

taxes $2200 /yr

Insurance (awaiting accurate quote) estimated $1200/yr

Seller financing $195k at 5.85% 5 year balloon amortized over 30 years with monthly payment of $1150. If not paid in 3 years then required $15k additional towards the principal at that time.

Value unknown as appraisal isn't required. Comps came back anywhere between $150k-$340k.

Current rents are low, property has 2x 3/2 and 1x 2/1. The 3/2's market rent is between $950-$1100 and the 2/1 is between $675-$850. This is really the only way i think this deal would make sense but raising the rents $200+ per unit would likely mean turning over current tenants which would mean additional costs to go with that.

Thank you in advance!

@Shane H. First off, nice work on structuring a purchase money mortgage. And ony $15k down!

As simply as I can put it, your ARV is really important here...if you are re-fi' ing out, you're looking at 70% ARV...if you get the purchase price incorrect you run the risk of losing the property to foreclosure (or scrambling to make other arrangements if possible). Get with a good agent (or I'd be glad to plug this into RPR and see what we can find on ARV). Ultimately, spending $600 on an appraisal is better than getting killed on this deal.

A couple thoughts:

insurance on a landlord policy seems low, but maybe not- year built will make a big difference...building materials like asbestos throw a wrench in things...

36-months is probably an adequate amount of time to get situated, but make sure you have reserves in place if you can't

Just make sure you are very familiar with lease terms...adopting tenants has good and bad outcomes...

Keep me posted how this develops.

Originally posted by @Brandon Sturgill :

@Shane H. First off, nice work on structuring a purchase money mortgage. And ony $15k down!

As simply as I can put it, your ARV is really important here...if you are re-fi' ing out, you're looking at 70% ARV...if you get the purchase price incorrect you run the risk of losing the property to foreclosure (or scrambling to make other arrangements if possible). Get with a good agent (or I'd be glad to plug this into RPR and see what we can find on ARV). Ultimately, spending $600 on an appraisal is better than getting killed on this deal.

A couple thoughts:

insurance on a landlord policy seems low, but maybe not- year built will make a big difference...building materials like asbestos throw a wrench in things...

36-months is probably an adequate amount of time to get situated, but make sure you have reserves in place if you can't

Just make sure you are very familiar with lease terms...adopting tenants has good and bad outcomes...

Keep me posted how this develops.

Thank you Brandon! I made a lot of dials and received many "no's" when looking for an owner finance deal. I think that is partly what may be clouding my judgement on this is how much time and effort and rarity is involved with this deal. The reason i posted on here was that I finally received the income/expense breakdown from the owner yesterday and saw what he pays in Utilities is almost 3x what i had anticipated.

The refi is crucial, and I explained my thought process to the owner who is willing to work on the terms but said he wouldn't go down to $195k PP (Hey, i had to try right?) but maybe he can go down to 200-205k.

The comps I quoted were pulled off an ARV of a 2 mile radius. I'm not opposed to getting your thoughts on one, but full disclosure that one was already ran and the agent didn't really have an opinion. She did say she specializes in buying, not selling though.

@Shane H. sure thing...we have a national database for comps...I'd be glad to attempt to find it and get a report over.