Help. What's the best way to buy this property?

3 Replies

Hey there everyone. I'm getting ready for my buy my first rental, that's if I can find a way to do it where the numbers make sense. 

I currently work as a general contractor in Houston, TX. One of my best and long time customers is a lady who is in a tight spot. She was taken advantage of after suffering home damage during Hurricane Harvey (2017) and lost almost all of her savings. That's when I met her. I came in and finished putting her house back together and she's continued calling for little odd jobs here and there over the years. She's also a nurse and was making good income, except she was forced to stay home toward the beginning of 2020 because of her age, therefore she's eaten through the rest of her savings. She's been in contact wanting me to fix some things with the house so she can sell it, however she's had to put all the fixes on hold because she has no money. Her goal is to fix up the house, sell it and retire near her son in Arkansas. 

Her home is estimated to be around $240k and she owes $37k.

I'm estimating repairs to be around $10k and I currently have $50k available

I am trying to think of a way that makes sense for me to purchase the house and take care of the repairs so she doesn't have to worry about coming up with any other money, while at the same time not tying up all my money for a long period of time. I was thinking about looking into owner financing, however I'm not sure if thats an option since she still owes on the house. If owner financing is not an option, I'm trying to figure out other possible options to finance the purchase of the house. 

Thank you for any advice you can give,

Mike

If she is willing to carry a note for you, that would be ideal. You could buy the place for ex: $200k or less (less is better) (you don't have to pay realtor commissions or repairs... just buying the house AS IS). You could come in with $40k, that would pay off the current lender and she carries $160,000 note for you (you can negotiate interest only terms with her). You can then spend $10,000 in repairs and list property for sale by owner (FSBO) $240,000. In this market, you may be able to make a little more than that. Once sold, you pay whatever balance you owe her and pocket the rest.

You could even use a lender to finance 50%, have her carry a 30% balance to allow you to come in with only 20% down (or some variation of that). Obviously, the purchase price is key. As an investment purchase, I don't know you'll find an LTV/ CLTV higher than that. Let me know if you have any questions

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Brian, I believe Mike wants to buy and hold the property not list it for sale as he indicated his intention to have the property as a rental. The Seller financing sounds like a very good option. Also, Brian indicated he did not want to deplete his available funds of $50,000.00 Some questions to be answered would be what is the prevailing rents in your Market Mike? Long term rental or short term? What would be the ROI in 3-5 years, lots of variables here to consider depending on the ultimate goal for the property.