Hello all what do you think of this deal? Rents are low the current owner has owned the property for 5 years and never raised rents. Tenants are month to month with no lease. This will be owner financing for 1 to 2 years paying $20,000 down with 3% interest. I'll need to refinance by the end of year 2. Current rents are $450 and $400. I can raise rents to $650 and $600. I'll more than likely lose the renters who are long term renters. How would you all proceed in raising rents? Would you even buy the property?
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If you're confident in the rents of $650 and $600, put them in your calculator to see how it looks with those rents. This will give you a better idea of the true ROI. I'm under contract on a property I feel is "under rented" - pretty common. Month to month you have a civil conversation with the tenant; in short - "hey I'm the new manager of the property, markets rents are *this*, we would love to have you stay, we would just need you to sign a new 1 year lease at *this*. If you aren't able to pay *this*, we just ask you are out of the unit at *this time*" Or something of that sort. Worst case, they can't pay and you're stuck trying cash for keys etc.. So with a current tenant paying under market value the deal might need a slight buffer to your costs, but a good deal is a good deal.
Hard to say "good deal" or not, as need a lot more info for that. Barely meets 1% rule, even with bumped up rents, so if this is in a "D" market, wouldn't grab my attention much, but if this is in a nice market and you NEED seller financing and somehow you are getting sub 20% down and a 3% rate, this could be awesome. For those same reasons...a few red flags..why are you getting such an awesome seller financed interest rate? Slightly odd.. if it's a family member doing you a favor, awesome! If it's not, why is the seller giving those good of terms? Perhaps you're paying a premium $125k could be high... but would need more info..