Turning a bad deal into a good one

18 Replies

Hi everyone on BP. I'm in seek of an idea on how I can turn a bad deal into a good one. This is the situation. There is a landlord here I'm Houston that has three turn key properties for sale. They where once 3 bedroom 1 bath single family homes. He converted them into 5 bedroom 1 bath homes. He is renting them from 1400-1500 per month but they are not in a good area of town so he has only section 8 tenants. A regular tenant will never pay that amount for the area. Comps are 800-900 a month. He wants to sell but he wants way to much. He's asking 99k for a 65k house and he is very stuck on this price point. He already had one bank financed loan fall threw after the bank ran the appraisal. These homes have been on the market for 110 days and the agent says if he can't get a buyer at the price he wants, he will continue to rent them to section 8 tenants.

Here's the deal, I want these properties because they are in a gentrification area and I think if he is presented with a reasonable cash offer for all three properties and I can solve his current tenant eviction problem he may go for it.

I will greatly appreciate any thoughts or comments

Thanks

Strike a deal using owner financing. Price, terms and conditions can be set to work for both sides. If he is not willing walk away. 

Offer closer to what he wants price wise but negotiate a minimal interest rate that works for you. Minimal DP, 30 year term with a balloon at 5-10 years when you can finance.

Wow.  I cannot fathom a situation where I would want a 5 bedroom/1 bath house with overmarket rents in a bad neighborhood at an inflated price .  (At a 65k price point, I suspect that neighborhood is a long way from gentrification.)  I agree that maybe there are some crazy financing terms you achieve that make this profitable, but I would ask whether this type of house is the type you want to manage.  Wear and tear on these properties will likely be huge.   Sounds to me like you are trying to force the deal.  

I agree ,ask about owner financing! I would avoid having a balloon in the deal though . Try to get 10% or less down and a fair interest rate like 6 or 7% .get the loan for as long as he will agree to preferably 15+ years . If he’s getting that good section 8 money he may be reluctant to sell his golden geese

Spend your time finding a good deal, don't spend your money on a bad deal. 

That being said. there are variables that could turn the deal into a good one, but we don't have enough details to give you better advice.  

  • whats the location? 3rd ward? 5th ward? EADO?
  • What type of house?
  • year built?
  • were permits pulled converting a 3/1 to a 5/1
    • I've heard horror stories of people having to convert a house they bought back before they could get permits to do additional work
  • you say turnkey, but with section 8, it usually isn't turnkey. 

if you don't want to share publicly, PM me an address and i'll let you know what i'd pay and expect as ARV based on the location, comps, and images.

@William E. Thanks for the info William. They are single family homes in the sunny side area built in the 1960s. I’m not sure if the modifications where approved but that would be something I would look into. From the pictures all three are almost turnkey. There is minor cosmetic work needed on the exterior. Interior is ready

Offer what the property is worth to you. If he won't accept it, move on.