Potential to buy the property we rent

[Alex Hickerson]

Hi all, first time posting. After having been researching outside of my market for potential investment properties, the prospect of buying the home we rent has come to a head. Since we first signed a 1 year lease agreement 3 years ago, the owner has expressed wanting to sell to us, or that we would be the last tenants she has in the home. She is a woman in her 70's and has told me her daughter would inherit the property should she pass. By the integrity of her word she kept that we have first rights to purchase the home. It's in a very high COL area and we are lucky to pay $2500/mo rent M2M now. She owns the property outright and wants close to $1M for the house. However, it's a 2/1 about 860 sq ft on almost .25 acre. There isn't much room for rehab at that price point but plenty of room for expansion on the lot being that it's flat. Minus the few trees that would need to be cut down and minor grading for outward footprint. Her daughter contacted me asking about the "offer we were planning to make" on the house. My assumption, to move the wheels to put the property on market if we don't make an offer. Now I'm backed up against the wall with trying to comp the property to hopefully wholesale to someone that can build it up. Like I said, she wants $1M but it needs alot of reno to make it worth the work. A home totally finished 5 lots down sold in June for $890K, 2/1 on 5000 sq ft lot. I'd appreciate any advice or info from anyone at this point. Being that it's so close to the holidays it's put me in a very mental bind to figure out the situation. Thanks in advance, I look forward to any conversation!

[Brenden Mitchum]

Hey @Alex Hickerson, welcome to the BP community!

Ah the joys of living/investing in CA - where the land itself makes up more than 90% of the property value. 

First off, I doubt they will try to sell during the holidays. If they do, then they have done zero research or have not spoken with a good listing agent. Perhaps your landlord's health is rapidly declining? If not, I'd say you probably have a bit of time to figure this out. 

However, you will need to start moving. One comp at less than 50% the sqft of the subject property is of little help. You will want to find something bigger than your home and on more land to get an idea of the potential sale price after expansion. Once you have this, you can start running your numbers to determine what you could make wholesaling the property to a flipper/developer. Without those comps, you're flying blind. 

You will also need to start reaching out to folks in RE in your area. Talk to agents, investors & wholesalers to learn as much as you can about the market. Maybe go to some meetups? Networking will be key here to find potential buyers. 

This could be a great opportunity to make some $$ to funnel into your OOS investments. Nobody wants to move after 3 years but getting paid $10k+ to do it isn't a bad deal. 

Hope this helps a bit. Please, feel free to reach out anytime if you have other questions or just want to chat!