Seller aggressively firm making it difficult to brrrr

20 Replies

The seller owes 46,000 on his property and is looking to walk away with 100,000 cash I was trying to Brrr this property. I was getting an additional line of credit to help with closing costs the seller is firm on not coming down on his hundred thousand dollar to walk away with he is retired and saying he will find someone else. I was approved for 162k and remainder of the money was supposed to be for rehab. the house has an ARV of 204,000.

This house is practically turn key ready. Should I just purchase my first rental and start renting it out or wait until I find the right brrr deal?

Right now, how easy do you think it's going to be to manage a major renovation? Get guys out there, keep them on the job, get materials in, have cleaners come and that realistic in the time of coronavirus?

@Jim K. The only rehabbing I would need to do is finish the basement. My realtor says I could rent as if if I were to purchase it. But if I do purchase for the additional 10g totaling 156 so the seller can walk away with his 100k it leaves me with very little left over that I planned on using for the rehab.

So I’m wondering since it is rent ready do I just get started on my first property and collect enough to rehab it in a few months? Or should I pass and find a cheaper property? I guess it’s essentially a good problem to have I just know it will slow down my next purchase that has me torn between decisions

I would be purchasing this house with no capital in this deal so for that matter with it being ready to rent right away what should I do?

So what is the home worth as is? More than $146?  How much will it rent for?

Your cash position, the seller position, whether you BRRR or not has no bearing on above. What's it worth and what will it rent for are what matter.

@Damien Papillo

Your realtor wants his commission check now, now, NOW, before he starts sheltering-in-place. He would tell you the sky is pink if he thought it would get you closer to signing on the dotted line.

If I were you, I would put my money back in my pocket, forget about getting my start in investing and taking my shot at building a rental empire until the pandemic is under control, new cases are going down each day, drastic new actions on the local, state, and federal level stop being taken every day.

@Jim K. makes a great point in that we may not know how easy it will be to hire/keep workers on property.

You were approved for $162,000.  The seller is firm on netting $100,000 and owes $46,000 on the property which means the minimum you could buy the property for is $146,000.  That leaves you with $16,000 if you take out the full loan.

Question is...what kind of work needs to be done to the basement?  You mention that some work needs to be done but also mention that it is rent ready? 

Looking at the ARV of $204,000 with little work that needs to be done to the basement it looks like you still have some wiggle room. But you're right - maybe buy and hold is the better strategy here instead of BRRRR.

@Damien Papillo Consider also as a buy & hold, will your potential renter be able to pay if they get laid off or the business they work for closes for an extended period of time? In many cases when the seller is firm for whatever reason, it may be because they know something you don't yet about the property. I think it may be hard to get a good tenant at the moment, I would suspect most current renters will be staying where they are for the moment and those that don't may be just playing the system since they know they can't get evicted for some time. If I were you, I would only offer what you are willing to spend to make the property profitable for you. Don't let emotions get involved and if the amount the seller wants doesn't work for you, just walk away. There will probably be more deals coming in the near future.

@Damien Papillo - I would advise my client to dig their heels in.. this is not an opportune time to be selling. Call the bluff, if he walks there will be plenty of other opportunties

@Damien Papillo Walk. Cash is king right now. Move on to something else. It’s a buyer’s market. The right deal is out there and you are in an enviable position. Get out there and find a better deal.

Good Luck and stay safe.

Is the property currently rented? If not, I'd 100% either walk away or put the sale off until things get better. 

My city is no longer doing CO inspections. So even if this is turn key ready, you may not be able to get a renter in there if the city isn't doing CO inspections. Also, how are you going to show the property if everyone has shelter in place orders? Even if there's no shelter in place order, a lot of people will be deciding to just renew their old lease rather than go out and find a new place because of social distancing. 

It's not a great time to buy for investment purposes, unless you have a ton of cash to help carry the property while it sits vacant. But you'd need to be buying at a premium for that to make sense then. 

Originally posted by @Damien Papillo :

@Mike D'Arrigo he is retired and looking to move to Idaho and just wants to walk away with 100k. My realtor had the same exact house literally 5 houses down in the same neighborhood that sold for 204k

Damien, unless I am missing something, why would you not take this deal if he's willing to take $100K and you can substantiate that the value is $204K. This would be a no brainer to me. The whole purpose of a BRRR is to have built in equity. Normally that requires putting a lot of work in to it. If you can get built in equity with little work, why wouldn't you do it?