I just made my first offer! I'm nervous, excited, nervous, can't sleep, nervous, happy, scared and did I mention nervous! Here is a quick snapshot:
Coworker retiring, needs to sell to move out of state to help his daughter, owes $50k on mortgage. Hasn't contracted with a broker but had one do a market analysis for him. Came back just under $180,000. He was skeptical based on same house slightly larger and newer inside Two doors down listed at $159k for over a month with no offers. I ran comps of properties within 1 mile that have sold within 6 months and two within one block currently for sale. I come up with an average of $72/sqft with very little variance which equates to just over $130k. I explained in my cover letter how I came up with my number and stated that all of these people paid 6% to an agent/broker on their final sale price. Spread in the area seems to be running at almost 10%. I offered $130,500 (1812 sqft). First option was traditional with 20% down and lender finance and a rent back of $1275 until he is ready to move in December. Rent goes to $1400 Jan 1. Optional offers include purchasing an option to buy that starts when he retires near Thanksgiving and expires at the end of January. Option two was $60k down and seller carries for 15yrs at 5%. Same options on immediate or option purchase. Analysis shows $1400-$1500 rent for comps. Used $1400 in calcs. Traditional nets +- $125 cash flow with 5% for vacancy, capex and maint. and 12% property mgmt. Typical pm is 50% first months rent and 10% per month. Investor I know has had no vacancy in the same area for almost three years. Owner carry option cash flow is just under $100. ROI not great for either option but I'm ok with it. IRR should be good due to it has new roof, siding, windows, AC, and washer/dryer. Kitchen appliances, water heater and furnace at half life. What do you think?
I forgot to mention that I plan to manage at first and see how it goes. I have experience in property management but this one is 45 minutes from home. If the tenant isn't needy and I can use my investor friends handy man then it could work. My dad is retired and was a property and construction manager so that's another option but he tends to disappear without warning. Being retired must be so boring having to travel all over the world just because you have nothing better to do.
Hey @Paul Stout congrats!
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