Question about knowing if you have a "Deal" and MAO

[Matthew J. T.]

Ok let's say owner is selling house sat 90k, and owes 85k on it. What do you base it on whether it is a good deal or not? If they owe less than the house is worth or owe significantly less? What should I know exactly from the seller, before deciding if it is a good deal to fall through on? I know obviously it's a bad investment if they owe more than it's worth.

I know you should be at least making a deal at 70% below the ARV or less, if they aren't willing to sell it below 70% of what it's worth, does that automatically mean it's not a deal?

[Will Barnard]

Without knowing your strategy, it is impossible to answer your question.
If you are intending to flip, then yes, the guideline formula is to buy at 70% of ARV less repairs and that guideline must fluctuate devending on specific circumstances such as, if the property's ARV is only $75k, you will likely need to buy below 70% less repairs or your profit margin will be too small for the risk and effort.

If you are a buy and holder, the only thing that really matters as far as the financials is the cash flow. If the gross rent, less the 50% expenses, less your debt service = cash flow, then you may (or may not) have a good deal. if it does not, then you likely do not have a good deal (of course there are other factors to consider such as potential future appreciation, tax deductions, principle pay-down, etc)

If you have a seller who owes only $5k less than the actual value of the home, then you have no deal unless the lender is willing to short pay the loan for significantly less than what is owed which is unlikely unless owner is way behind on payments.