House for sale by Owners - Questions

8 Replies

We have a deal in front of us and we need a little advise. Some friends put us in touch with this deal and we want to help them and ourselves to a win / win

1100 s.f. house 3/1.5 in an ok neighborhood. Clean the carpets and its ready to rent. Very well keep little house. Newer Heat and air. New windows. Roof 10 years old. 

The owners are wanting to sell fast(leaving town) and do not have a Realtor yet. They have looked on Zillow and said it is worth 80,000. I show this house should sell per the comps in the area for about 73.000  and I am sure we can rent it for 850.00 a month. We want to buy and hold. it is only 4 blocks from our home. 

Offer is not been presented yet. Any advise? 

 Where to go next? We have bought at Auctions and with Real estate Agents but never from the owners. Do we need to get a lawyer to make a contract and them find a closing company? Should I get my agent in on this? Any advise will help. 

Find out if there are any liens. first ask the seller. Then confirm with a title search (by title company). If they own it free and clear explore seller financing if they are very motivated.

After you get a clear title I would suggest having a RE attorney Draft a purchase agreement for you if you decide to purchase. That attorney may also suggest a title company for you to use if you do not have one. 

Before making a offer be sure you look through the numbers much deeper than Zillow. Understand the repairs needed to the home to get it rent ready. Your financing is specific to you and this deal so ensure that you can make this a solid investment with the financing you are able to acquire ( if any).

Hope this helps. Deals have many many factors to give you a specific guide to take is impossible. 

If you get your agent involved they will want a commission and usually when you are dealing with situations like this you would work directly with them, no agent as to get the best price.

You can find a simple purchase and sale contract online to write up an offer to submit.  Once you get them to sign assuming they agree to your offer you send to your closing attorney.

If you feel the home is only worth about $73k then dont offer more as that would be considered full market value. I would start lower around $55-$60k so you could hopefully meet at your target price.  Are you paying all cash or doing financing?

The repairs are minor ones that I will do myself in a weekend. We can do a cash deal or financing is ready since we had another deal not close (another story I will share later).

We have been studying this market for a year now and should cash flow ok. I have noticed that there are not any houses this size for rent here. So looks like a hole that needs to be filled.

We will use your Idea's

Thanks for the help!! Just a little nervous on this one The market here is moving fast and we want it done tonight so we don't miss out on it.

Made the offer last night. Not sure where its going. They did not think it enough so we explained our offer and the market as we see it. We are only interested in a win - win so  I gave them my agents card if they decided to go that way. Learn more from this so it was still a win.

Thanks for the advise

@Kevin LIVINGSTON  

This place passes the 1% rule.  How do the rest of the number shape up?

I like to look at:

Taxes

Sewer and Water

Trash

Heat/Utilities

HOA

Cap Ex and Ops

Insurance

Mgmt Fee - as a % (general consensus here on BP is 10%. include it even if you think you are going to self manage)

Vacancy- as a %. (8% represents 1 vacant month/unit/year)

Seller turned down our offer with no counter. They decided to list. I in turn gave another offer and waiting to see on it. 

We offered 76.000 which is more than we planner on in the beginning. Here are the #'s

Insurance 80.00 month

Taxes 1200

Water Sewer and Trash 65.00 month

no HOA

Heat and air I would guess 1200 a year

We will have the tenants pay Utilities.

Comps from sold last year 60-80 s.f. 

I know we can get 850.00 and maybe 900.00 rent on this one.

1100 s.f. 3/1.5/2 brick house roof 10yr old, heat. air and water heater new 3yrs  new insulated windows 3yrs

Stove micro  frig clothes washer and dryer all stay. nice fenced yard. 

On another note. We have been trying to get a second rental since January. We have been going for foreclosures but we keep getting beat on the bids.

One house we bid 123500 with financing and it sold for list at 117000. This makes us think we have to go in with cash to even have a chance. Any thoughts? 

We did have two offers accepted on owned properties but when we did inspections the repairs were to high. So we have spent 1500.00 on that so far. Good news is I went with the inspectors and have learned what to look for and how. As my son said I got Educated. 

So if it is worth 73k, why would you want to pay 76?  Make sure you dont fall in love w/ the property as I see the amount for rent creeping up.  Arent there similar properties you could get cheaper?

Good point.  My thinking is this house is in great shape and the maintenance will be lower. Most of the properties we have been seeing in this range need alot of work and holding costs make this one look good.  But your right maybe I should take a step back and see where it goes.

Thanks for that heads up.

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