5-Unit with Distressed Owners

3 Replies

I have used my own money up to this point for investing. After reading Brandon's Book on No and Low money down investing I want to change my strategy.

I am looking for some ideas how to approach this deal. The property has good bones but needs some work.

 They haven't done any capital improvements over the 10 years they have owned it so I will verify the numbers with my contractors prior to purchase. Looking at an immediate $50,000 rehab then a spruce up for each apartment with tenant turnover.

The rents are easily $125.00 - $200.00 below market value.

They are about halfway through their 20 year mortgage and owe around $115,000. I would need to get it for $100,000.

My thought is to offer a lease option to purchase within 3 years. Over the first year, I could do all the work needed and then they would owe around $100,000 so they wouldn't have to take a hit.

Then I could get a loan for the 70% of the value.

The ARV would be $225,000 - $250,000 depending on the cap rate they would use. This would give me a 20% equity stake after the new mortgage and only have 10% skin in the game.

Is this possible or maybe their is a better way to go? Maybe make an offer where they need to come to the table with some money and I use hard money for the purchase?

I look forward to hearing from you.

Thanks,

Kyle

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They are divorced and this property is the only thing that they have in common. Their insurance is going to cancel because of the condition of the property. They both want out and have had it on the market for a couple of years.

With a 10%cap rate it is worth about $150,000. It needs $50,000 worth of improvements. I see the FMV as $100,000.

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