Would this be a deal breaker for anyone?

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Would this be a deal breaker for anyone?

Jessica Brennan
Investor · Illinois and Iowa · Member since 2020 · 36 posts · 24 votes

I have an opportunity to purchase an off market deal, however I'm hoping someone here has dealt with something similar and can give some advice. The house is being sold by the daughter of the man that lived there. However the son lived with his father. Son doesn't work and is refusing to move out. She is from out of state and just in town to close out all of her fathers business. The house is for sale for well under market value because of the problem that the brother is. He won't let anyone in, and she had to get the police involved to just get pictures of the inside. The house was converted, and now has a full apartment upstairs that is separately metered. The upstairs apartment is in perfect condition, the downstairs needs a lot of work. I called my insurance company to see if they will cover any damage that he causes after the house is in my possession, they said they would but I would need to show it was in good order prior to his 'vandalism', but we can't gain access. This also means no inspection. Does anyone have experience with this? Its an amazing deal that I don't want to walk away from (Cap rate 18+%, IRR 67%) but obviously that would change if he destroyed the house.

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Ned J.Pro Member
Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes
5y

You can try and have the deal be contingent on the sister getting him out/evicting the brother first...... offer him cash for keys as part of the deal and have that cost reflect in the offer.

Offer him a couple of grand to move out...... only to be paid when he is out and the property is inspected and has no additional damages.... then finalize the sale.

Its a leverage point to get a good deal.... the sister probably just wants this over and get her $$......

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  • Jessica Brennan
    OP
    Investor · Illinois and Iowa · Member since 2020 · 36 posts · 24 votes
    5y

    @Mrinal Parashar Thank you so much for the advise your experience. Hope it all goes well for you!!

    0Reply
  • Lynnette E.
    Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
    5y

    I had a very similar situation with my brother.  He was leaching off my mom, living in her house when she passed away.  He would not leave.  He even got $40k upon her death to leave, but he spent it on drugs and a used truck with a broken trans.  He also was getting $ when the house sold, but he got a lot from the estate and was not hurting for money when things all settled.  He wanted to live in the house, but it had to be sold.  There were 11 heirs getting portions of money from the house.  He was a major heir and could have bought everyone else out, but did not want to do that, he just wanted to stay there with me paying for all the utilities, gardener, upkeep.

    What worked to get him out was actually the realtor.  She came by and sympathized with him about how awful it was that he lost his mom and now his house.  She asked him if he needed help.  Offered to rent him a storage unit and a few days later offered to pay for guys with trucks who could help him move his stuff to the storage units.  He would be their 'supervisor' and tell them what to take, and how to do it.  She just kept feeding his ego.  Yes, its up to you when you go, until a judge orders it, but why let your sister get away with having police kick you out and put your stuff on the curb.  Mean sister no way you can pack all that stuff your self.  She will just embarrass you with the police kicking you out in front of the neighbors.  She got him to cooperate and move out, just by feeding his ego and sympathizing with him.  He needed a third party as he would only be nasty with me.

    And the buyer got a great deal--$60k off.

    Do you have a third party that can work him?  And maybe before the third party talks to him the sister can turn off the utilities in preparation of the sell.  And you do NOT transfer or turn them on,  have none until he is gone.

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  • Tim Bender
    Real Estate Coach · Joplin, MO · Member since 2017 · 13 posts · 65 votes
    5y

    I’ve bought numerous properties that I’ve never been inside, but I buy them at about 10% of appraisal from what I can see of the property. I’ve also bought them with hostile tenets in the property. This is where you have to put your mouth where your money is. You have to contact the brother and find out his motivation. Does he have a bad relationship with the sister or his deceased father, does he need money, mental issues, drug addiction? Every one has a motivator, you have to find out what it is and work with it to get him to move without gutting the house. I would make contact and figure out your solution before closing the deal if your in it for that high of a percentage unless a total repair job still works with the equity. I’ve hired movers for people that couldn’t get moved, given them money, found them new places to live, whatever it took. One piece of advice though, if you strike a deal to give him money to move, no money is handed over until he actually vacates. Also if you strike a deal for him to move, have him sign an “moving assistance agreement” which I can email you a copy. That way you have something in writing with him, so if you do need to go to court it will work out in your favor and you have more teeth to go after him with if need be. Good luck.

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  • Jason P.
    Investor · Bay Area · Member since 2020 · 42 posts · 19 votes
    5y

    @Jessica Brennan any updates? How’d it go?

    0Reply
  • Enrico Angella
    Rental Property Investor · Rome Italy · Member since 2020 · 42 posts · 19 votes
    5y

    I wouldn't personally invest in a deal like that. No inspection prior buying and the whole family drama would be a lot to deal with.

    Did you eventually decide to pass on or did you buy it?

    0Reply
  • Jessica Brennan
    OP
    Investor · Illinois and Iowa · Member since 2020 · 36 posts · 24 votes
    5y

    I passed on it, had a much better deal come through so it wasn't meant to be!

    1Reply
  • Steve Smith
    Member since 2020 · 217 posts · 167 votes
    5y
    Jessica,

    Good for you... take the deals that are the best for you!
    0Reply
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