Would an investor buy this house?

Question

Hello,
I purchased this house a little over a year ago - my first one, I BRRRed it and in February I decided to sell it. The tenants moved out so that I could show the property and now I am having trouble selling it. I have it listed with an agent, but am considering pulling it off the market, getting tenants in it and trying to sell it to an investor. So I am looking for some feedback. What price would make this property attractive for an investor. Here some of the numbers:

Here are actual numbers (assuming you get the loan below)

Appraised 1 year ago for 82k

Current asking price 79,500Insurance 58 -monthTax 65 - monthPrevious Monthly Rent 750

I replaced the roof, updated some electrical work, new tile, new carpet, new paint - all done a little over a year ago.

Here is an MLS link:  http://realestate.sabor.com/homes-for-sale/939-Gra...

It is a stick built home, but keep in mind that it is surrounded by mobile homes.

I am particularly interested in feedback from folks who are investing in Canyon Lake, San Marcos, or Austin and are familiar with the area.

It is currently getting some showings, but no offers.  What should I do?  Wait it out?  Take it off the market and try to sell to investors for a lower price?  Give me some ideas.

Thanks in advance!

Andy Audate · Answer

@Steve Derringer If you do the work for an investor as far as getting the location rehabbed and a tenant on a lease, and the title is free and clear, no liens. Property qualifies as turnkey

Steve Derringer · Answer

Thanks @Mike D'Arrigo I could try to push rents a bit, but, like I said, not the best neighborhood.  Thanks for the advice.  @Andy Audate I am not sure about marketing this as a turn key property.  I can put a tenant in, but I am not sure that this deal fall within the parameters of most turn key buyers.  Do you disagree?

Mike D'Arrigo · Answer

@Steve Derringer Are you sure you can't push the rents a little higher? I don't know where the property is but that's a low rent to price ratio and COC return for that class of property. If you do rent it before trying to sell it, just be sure to do a thorough, professional tenant screening and be able to show a prospective tenant the screening criteria.

Andy Audate · Answer

@Steve Derringer you can actually charge over MV as this house would be a Turn Key Prop.

Steve Derringer · Answer

Thank for the advice everyone.  There seems to be some consensus on keeping this listed on the retail market.  It is financeable.  I currently have a conventional mortgage on the house, and the condition of the house is generally the same as when my mortgage was approved.  I am open to more thoughts, but appreciate the thoughts that have been shared.

Rick Pozos · Answer

I have to agree that this is more of an owner occupant type of house. You have to think, can an owner occupant get a loan on this house?? Is it up to standards for a mortgage company??

I think ARV might be a little lower. Try dropping the price more than in $500 increments.

Jason Hirko · Answer

@Steve Derringer I'm going to disagree with Garry above. If you are selling a property like this to an investor essentially at retail, they are going to be a passive investor, who would want a turn key property. Otherwise, if they were the type that cared about putting their own tenant in, they would go try and find something under market value to immediately get some equity in and do it themselves.

As for your price drop, I think you could sell it for more to an owner-occupant, simply because you'll have 100 prospective buyers for every prospective investor buyer. But then you could always go that route and cover your holding costs until you do sell it. Let me ask you this though: why are you wanting to sell?

Steve Derringer · Answer

Well it is not that I don't want to put tenants in.  I just decided to sell it and move my money to another deal instead of refinancing my money out of it.  I hoping to pull my money out and buy more deals.  It has been a low stress property, and the alternative plan would be to hold it and put tenants in and try to refi some of my money out.  Thanks for the advice Garry!

Garry C. · Answer

Leave it vacant. Investors don't want to inherit a tenant if they can avoid it. I only trust me to do the tenant screening for my properties. And even then, it's questionable. An investor, as a general rule, wants to buy something at 70% ARV. So, if you're saying ARV is $82k, most investors are going to be interested in picking it up at around $55-60k.

Why don't you want to put new tenants in yourself?

Steve Derringer · Answer

Thanks for the quick feedback Jason!  I have thought about VRBO, but it is in a pretty rough neighborhood.  How far do you think I would have to drop the price to sell it to an investor?  Would you suggest getting a tenant when selling to an investor or leaving it vacant?