Can I find a win-win in this?
Can you please help me decide if I can help these people and possibly myself at the same time?
The back story:
An elderly member of my fiancé's family has a nice piece of property here in Anchorage that she is going to be selling. The house is too big for her now and the house and property require too much maintenance for her to keep up on. I *think* that everyone would like to keep the property in the family, but no one has been able to figure out how to afford that.
The details:
5/2 house built in the early 60's, on 1 acre in the University-Medical area, zoned R2A. There has never been a mortgage on the property. Soon to be listed for 420k, the property tax assessment has it valued at 400.
Questions for topic 1:
The 420k list price is suggested by the realtor, and I am curious if that is a reasonable price. That seems low to me, based on the fact that this is a flat, dry, usable and partially developed 1 acre in the U-Med district with an older but well cared for 5/2. It's not really my business and I'm not making accusations, but I'd hate to see someone advise her to list low and take advantage of this lady to make a quick buck. Is there any way besides shopping around for realtors, comps (few truly comparable properties seem available), or paying for an appraisal to accurately determine a proper sale price? Can she protect herself in the PnS contract, in case the appraisal comes in much higher than her asking price after she has signed? Is she going to have to pay a commission to this realtor, now that they've been talking, even if we work a deal out within the family?
Questions for topic 2:
Can you think of any way that I or someone else in this family can make this property pay for itself and simultaneously pay this lady out so she can relocate and enjoy herself?
I'm calculating the PITI, utilities and maintenance for this property at $3,400/mo. with the best loan program that I have found, which offers me a 5/1 ARM with a 3.0% intro APR and 5% down. That also leaves me exposed to potential expenses of $4,700/mo (gulp!) if the rate adjusted to it's max in 7 years.
I've considered using the home as student housing. After looking at student apartment rental listings, I believe we could get $550 a room, but that only comes to $2,750/mo.
I could treat the property as a duplex and move into the top floor and rent out the bottom floor (2/1 with maybe also the use of the garage) for $1,400-$1,600. That would leave us a payment of $2,000-$2,300 after all expenses and not an ideal living arrangement for my fiancé and I, but control of the property for the future.
I could propose a seller-finance of the property, but I am unsure how to make that work fairly for her, since she needs to find a new place and have money to live. Maybe I could get a low-down loan for 200k and have her seller-finance the rest? With the aforementioned loan program and giving a 5% interest rate to the seller I'm calculating that to be a net payment of $2,100/mo., with a down of 10k. This loan program is also an owner-occupant program, so I would basically be locked into the 'duplex' option, at least intially.
I don't see any way to be fair to this lady and make the property cashflow. I'm loathe to pick up the property if I can't make it cashflow, but I am tempted, based on it's central location and lot size. It would make a nice primary residence, but it's not shining as an investment. :(
More questions (?!):
Am I missing an option to make money with this property?
Calculating incorrectly?
Anchorage investors, do you think it's worth speculating on this property if I can't make it cashflow, based on the property description?
I have no sentimental attachment to this property (although I do like it) but my fiancé's father and siblings grew up there. Should I just stay out of this deal so no one in the family gets hurt feelings when I start managing the property however I'll need to?
I know that's a ton of information and a lot of questions, but I welcome all your comments!