How to think like a real estate invest

[Charlie Pioli]

I just broke my lease with my landlord who refused to fix anything, and the apt I was living in started to feel like a slum. Instead of calling him up and cussing him out like I originally wanted to, I called him up, told him that I'd be willing to buy the place from him and relieve the headache. He was flattered, and came back asking for 126k financed and 121k cash. 

I'd say the apt has a ARV of 150k and needs about 20-25k in repairs. It would generate a 1100k monthly cash flow, and is in the neighborhood so I could manage it myself.

Although, I don't know how I'd get the cash, or if I should even buy the place. I would love to hear people's thought-processes, and advice what to do in such a situation. Thanks!

[Omar Khan]

@Charlie Pioli How did you estimate the rehab budget? That will be the key. 

If anything, I would suggest negotiating hard on the price and requiring the seller carry back a note. You can make the case that due to the extensive renovations required, you want to work with them to ensure a mutually beneficial outcome. 

A note carry back can also put the seller in a tax advantageous position by avoiding/deferring taxes (consult CPA).