Unique situation what would you guys do

[Zack Whiting]

I found a property that is selling for  a third of what is worth. The stipulation is the guy who owned died and the family is selling it. The owner was letting his life long friend live in the property with no lease and only paying 450 a month but tenant is/was responsible for all maintenance/ repairs. The sellers want him to be able to stay until he dies (in his mid 70s) and that is why they are selling so cheap. If I did this deal I would pay cash and have to cover insurance and taxes which would be roughly 200 a month. Property is selling for 30,000 current value is around the 100,000 dollar range. It's in a class b/c neighborhood with potential for good appreciation. It also has two extra lots so I could pontentially build on in the future. What do you guys think? Also it is against my morals and beliefs to say I would let him live there  and evict him after taking ownership of property. With exceptions to him not holding up his end of the deal

[Jay Hinrichs]

Quote from @David Krulac:

We bought a property that had a "Life Estate" tenant, who was legally allowed to live their as long as they wanted or until they passed away.  There are actuary tables used to determine the value of a property encumbered with a "Life Estate" based on the tenants current age and gender.  Statistically women live longer than men and younger people will live longer.  So in your case a male of a certain age in their 70s is expected to live x more years.  Using this formula which is common practice, the sales price is reduced by the "value" of the "Life Estate".  In the property we bought, the fact of the "Life Estate" scared off potential buyer s and reduced the not only the pool of buyers but also the purchase price. The property that we bought was a 50 acre farm with a farm house, which we planned to subdivide into a residential development.  Having the tenant stay in the house was not any burden to us as as we proceeded with the subdivision plan, which we allotted a year to get all approvals.  Therefore the house was occupied, rather than vacant during that process.  It ended up that the tenant lived there for 2 years, then needed to go to a nursing home.  That decision was totally the tenant's timing and choice.  I would recommend that you get an attorney involved and negotiate a price based on what essentially is a "Life Estate."  Or I might also negotiate a departure date with the tenant with a cash incentive. The seller probably don't realize that the arrangement they suggest will cost them money, possibly a lot of money.

I did one same scenario but only could develop and build 3 houses for example property was worth about 400k at the time we paid 80k cash .. lady was able to live there about 4 more years and of course being the dysfunctional city of Portland Oregon took at least 2 years to get permits to build the 3 homes.. end result was 1.8 mil in gross sales and a pretty nice profit for us.  I don't bother to run the return numbers on 80k as its such a small sum.. But it worked. And the house was a demolished as soon as she left. Well I should say deconstructed in the socialistic city of Portland you cant just demo you have to deconstruct.