Close or run? (didn't appraise)
Hi there-
Wanted to get feedback on a deal my wife and I are working on for our second property (and first long-term investment).
We're in escrow on a 2/1 condo in the WPB area of FL. Great community on the intracoastal. It's the cheapest unit (about 20-30k cheaper than other current comps that are rehabbed) in the building and needs some light reno (floor, paint) and has a long-term tenant in the unit that has been there almost 20 years.
25% down (investment), 3.19%
The drastically-below-market rent the tenant pays JUST covers the mortgage/taxes/hoa/ins but no "soft costs." She has already agreed to bump it up a couple hundred in May so we'd at least be even or maybe a little in the green. We have experience with the neighboring communities and we're keen on the long-hold potential of this one.. have to be I guess if it's not cashflowing.
We just got notice that it appraised for about 13k under the purchase price. Seller has agreed to meet us halfway but I obviously feel like we have some leverage here.
Couple questions:
1. The appraiser's notes pretty much just referenced the last 6 months in the same community. Well... a lot has happened in 6 months. 6 months ago, units were selling for cheaper than they are today but it seems he just took an average. How solidly do we want to accept the word of one appraiser?
2. Would you stick with this deal knowing you could either:
- a. Raise rent a couple hundred and pay for itself
- b. Vacate the tenant, rehab and rent for market rate which is about $600 more than she's paying now
c. There is only so much inventory on the water - value will keep rising as inventory stays scarce
Or would you run? What do you factor into these things?
Thanks in advance!