Hi BP. I have a potentially profitable situation but wanted your opinions. My realtor has a property he wants to sell for $15K. He tells me it appraised at close to 42K. The rent is $525/mnth, but the tenant pays $575/mnth because of late fees. Of course I will ask him why he wants to sell. What other questions/documents do I ask for? At face value, this looks like it could have a CAP rate of .27%.
It is a 2 BR/1BA w/bonus room and central air.
Let me know your thoughts/suggestions.
@Stanley E. I would ask to see the appraisal to make sure it is current. I would also ask to see the tenant payment history. It sounds like the tenant is always paying late, this is not a good start. He might be wanting to get rid of a headache. Make note of any repairs, taxes and other costs. If you still think it is a deal, see if he will finance some of it so you don't have to come up with all that cash.
Carolina E. Thanks for the info. If I get him to finance part of it, would he hold on to the title until I finish paying off the mortgage with him or would I receive the title upon completig the deal.
@Stanley E. I haven't done a seller finance deal yet, but I have heard investors buying with the buyer on title or they do a land contract that the seller stays on title. Make sure you have a lawyer write up the paperwork so you are protected and you both know what is going on. Make sure it is owned free and clear too.
Close like normal and have a title company receive the payments. Sounds fishy to me.
@Stanley E. Is the property in your "FARM"? If it is or not, what should the rent be? Have you been in the property or seen current photos? Does it need work? Have you or your lawyer read the current rental contract? How are the comps priced? Is the 15K what's left on a mortgage? This could be a deal but if he's painting a beautiful picture then why is he selling it? As @Carolina E. said this is most likely his headache and I'll add that you're his Tylenol.
Thanks all of you for your candor and caution.
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