Need advice on 2.5/1 in college town / student rental area
Hello friends,
Please see the investment summary at the bottom of this long post.
I just got off the phone with an owner who NEEDS to sell no later than December to avoid paying taxes. He has no income and has just inherited the house from a relative who recently passed away. So the owner is mourning right now so I need to be sensitive to that. I have an appointment to walk the house at 1:30 PST.
My real estate agent did a market analysis and says that the property is worth around $190,000 in market ready condition, which this property definitely is not. There are no mortgages or encumbrances on the house. He owns it free and clear.
The house was built in 1914. The plumbing is pretty much busted. The owner is getting water from the neighbor's hose. The water heater will need to be replaced.
The owner tells me that the house is otherwise structurally sound with no cracks in the foundation. Of course, I'll ask my contractor to go in and check all of that out.
The next door neighbor is an investor who owns a lot of property and has already offered the owner $65,000 and has told the owner that he will help him with a new place to rent, something which he desperately needs. Since this investor has other properties, it seems to be within his power to offer. Maybe you guys have some idea of how he is going to do this.
I asked the owner if money was no object, how much does he want for the property. He said $75,000. I also asked him what he would like and he would like to be able to get a place of his own with some room for his dog to run in.
I estimate that it will cost somewhere in the neighborhood of $30,000 to get this place market ready, if not a bit more. I'd like to add a second bath if I could.
I told him that I would give him both cash and term offers today after walking the house.
So here's my question:
What terms can I offer him that will give him cash and some cash flow to pay rent or buy another place where he and his dog (Jedi) can have a good life. His dog is named "Jedi" and I told him I'd throw in free tickets to the star wars movie in November if we do the deal. He laughed. He liked that a lot.
Acquisition Options:
1. All cash - $75,000 and help him get a place. I'll need a cash buyer since I won't have the cash.
2. Lease option sandwich - Give him a cash flow for 3 years, enough for a new place, and cash in 3 years. I'll need a partner, private or hard money to invest in the repairs.
3. 100% Seller financing. I'll need a partner, private or hard money to invest in the repairs.
4. YOUR IDEA :)
5. YOUR IDEA
6. ...
Deal Summary
- $190,000 ARV
- Free and Clear
- $30,000+ Repair Costs
- Owner wants at least $75,000.
- Owner needs money (he has no job) for a new place
- Owner wants room for his dog
Thank you all for your help!
Dave