Seeking advice for 2FAM rental

[Corey W.]

Good morning!

After going under contract on a deal, it was revealed that the property needs much more work than anticipated. I just wanted to get BP's thoughts.

2 Family Buy and Hold

Offer was accepted at $270k

Seller is only offering $6k credit for repairs(This was their counter to my $15K counter)

Property requires just under $60k to get it somewhat decent, meaning this would fix a few major and minor problems. Such as the roof needs to be completely replaced (there is a ridge sag and seems it could fail, rafters aren't place correctly), the porch needs a larger joist as its sagging down as well, the basement still has asbestos, the basement needs waterproofing as there is a moldy smell and minor water leakage, barely update the 1st floor unit, update and correct the electrical (relocate a fuse panel in a bathroom), brand new panels in the basement with a larger feed coming in, concrete steps in front and rear of house are in need of some repair, the boilers may need to be replaced, replace a few broken windows(completely shattered, just a piece of plywood covers them now), the lower roof gutters were nailed directly into the shingles, there are no GFCI's in any bathroom or kitchen, and a few other fixes.

It would be an FHA 203k with 3.5% down

$9,600 per year in taxes

Garbage is included in taxes, tenants pay gas and electric, owner pays water

The 1st floor unit is a 2/1 rented for $1225, they have exclusive use of driveway, backyard and the basement. 

2nd/3rd floor unit is listed as 3/1, however there is 2 bedrooms on the 3rd floor with a bathroom. In reality it is a 4/2. Rented for $1650

Both units if some updates are done, could rent for quite a bit more.

Built in 1918

Insurance is $1100 / year (estimated by my insurance agent)

Before factoring in 60k repairs, mortgage is estimated at $1392/ month

Other 2 families in there area have sold from $314-$460k. There wasn't many comps so the analysis went back to July 2015 with 5 properties.

I appreciate any feedback. If there's a detail I did not mention, just let me know.