Found what I believe is a good deal in Kansas City, MO area from a motivated retired seller. 5 year tenet paying 920/mo (owner pays electric and last 12 month electric bills average to 135/mo). House is a small 2bed, 1bath, 1100 sq foot house. it's not pretty but looks like good potential. looking for thoughts on my strategy. (this is my 1st property!!!)

I'm paying cash, just under 50k. home value is probably about 75-80k. House next door exact same size and # of bed's bath was flipped last year and sold for 88k in October so 1 year ago. houses in 1/2 mile all seem to be selling between 75&115k. This is on the smaller end for the neighborhood. Next door had a basement, this house only has a crawl space so i'm dropping off 8-13k in value due to that alone. I drove the neighborhood in a 4 block radius and noticed several basketball goals & small kids bikes in driveways/front porch which is telling me relatively safe and comfortable neighborhood. Cars parked in driveways & streets all appear to be newer as well so i'm liking the general surroundings.

roof is 15 years old, heater, 5 years, AC & water heater are unknown in age. seller has owned for 15 years so at least 15+ years.

here's my thought: tenet is paying 920/mo and owner pays electric on month to month (electric averages $135). Offer tenet two options:

Opt 1) sign new lease with my property management company and cover their own electric, I'll drop rent to 775/mo.

Opt 2) sign new lease with my property management company and I continue to cover electric, I'll drop rent to 900/mo.

market rent in this area with similar size is about $750-800 but again this house is rough around the edges.

i'm considering a delayed financing to pull 75% of home value back out in cash if tenet accepts longer lease. if not, i may hold my cash in the property and when the current tenant leaves and expect to spend 15k in renovations to bring value up and cash-out-refi 6 months in... reno would likely be roof (only if necessary), water heater, refinish existing hardwood floors, paint inside (outside paint looks really good seller didn't disclose but i'm assuming it's been painted recently) maybe newer nobs in kitchen and newer counter top probably 15 liner feet today so not too big.

thoughts or other suggestions? if this goes fairly smooth i'm planning to buy a little higher end house (110-120k value), Jan or Feb time frame and just continue to build my portfolio rather aggressively over the next 24 months.

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Closing Friday on my first rental property!!! Nervous and excited

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