Would you buy this SFH?

Question

I found a 3br 1000 sq ft home with garage that an investor would sell rent to own for $75,000. No repairs are needed. The seller is asking for 3 or 5% down with monthly payments of $700 and he would finance the property. Could this be refinanced since the seller's rates appear to be above 10%? I'm looking to turn this into a rental and rents would be around $700 to $800 month. Would you buy this property?

Thx,
Tom

Bill Gulley · Answer

Tom, my first thought is ......run away!

As said, get comps! I also, most often, advise buyers to stay away from "rent to own". Leasing and taking a seperate option is a better way to go every time than having some rent to own contract....just don't do them! Lots of reading here about such deals....Good luck

Ned Carey · Answer

The numbers do not look even close for a rental.

What are the comps? Is there any equity? If there is equity you could possibly wholesale it to  a retail homeowner. If there is no equity, then the only way you can make money is by the Greater Fool Theory.

Michael Lauther · Answer

Thomas it appears that your investor may have priced the rent to own above market. Rent to own is a strategy that many investors use to lock in a profit and if the rent to own tenant fails to keep up the payments the owner gets to keep the down payment . Your anticipated rent is only 1% of purchase and your operating costs would be 50% of that on average. To qualify for a a refinance your property would have to appraise out at much higher than $75,000.

If the comps on the property turn out to be much higher than the 75k and you have good credit and a down payment than this can work but experience tells me that this property is priced retail or above.

Thomas Handy · Answer

I told the seller the numbers wouldn't work for me.  Then he shot back make me an offer.  While I was working the numbers I asked him if I could refinance the property and he said yes.

I also talked to a property manager area to get an idea on what this could rent for.  He has a few properties in the area and they rent from $750 t0 $820.

Initially this may cost me a month or two out of pocket but after refinancing, this looks like a good deal.  I'm going to take a look at the property and just may put in an offer but first I need to talk to a few banks about refinancing it.

Ned Carey · Answer

Thomas Handy you are welcome.

Stanley Crawford · Answer

Do not buy..  Price is rent ratio is all wrong for a rental.

Thomas Handy · Answer

Thank you everyone!  I was looking to see if there was any way to even make this work but I guess not.

Ned Carey
I don't have the comps but from what I've seen for homes similar to this, they sell for $60,000 and below.  Most older homes here don't have garages so that is one bonus.

Monica Breckenridge · Answer

No I would not buy this property.  This is a win for the guy selling and not a win to you.  This guy needs to sell to somebody who wants to live in the house and eventually buy it.  I do lease options as well, but I would never lease option to an investor, it's always an owner occ.  I would also never buy a house where the monthly payment and cashflow are the same amount.  That is setting you up for failure.  One month of vacancy and and issues is all going to be out of pocket for you.

Would you buy this SFH?

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