First Deal Under Contract...to then find abandoned home next door

[Jake Sanders]

Hey everyone, I really need some advice here. Here's the backstory on how I got to this point.

I was super pumped to have found this newly renovated clean looking home at a great asking price. I found it on the day that it was listed. Because in the past couple of weeks these good deals have been under contract within days of them going on the market, I ran the numbers and made an offer the next day. I ran the numbers at full price being conservative and they looked good. I figured that if I didn't offer full price the deal would be gone and I would have lost it.

So I made an offer early in the morning of the second day on market. Full price with $1k earnest with the plan of having the inspection as my backup to back out if anything was wrong with the property after I went to look at it / got it inspected. It got accepted and I had time to go look at it that day after work.

I pull up to the house...and the first thing I see is that the house next to it was all boarded up and vacant. It was the biggest eyesore and immediately I knew I had a problem.

SO, where do I go from here? What are my options? The way I see it, these are my options:

1. I can stay the course and hope that the house next to it doesn't dramatically decrease my tenant pool and if it doesn't, it increase the amount of sketchy activity around my new property.
2. I can eat the $1k earnest and backout...maybe?

I know that potentially buying the vacant home from the city is an option; however, I don't have the cash or the will power at this point to try and figure out how to buy a condemned home, fix it up and turn it around.

The property I have under contract is in great shape for the area that it is in and having assumed that there wasn't a vacant property next door I estimate it would have rented for above average market rent.

Here are some of the deal numbers to help give some more context.

Purchase price: $70k

20% down at 5.25%

Only upfront cost put into property would be a couple of appliances (~$500)

All-in for ~18k estimating $3.5k closing costs

Reasonable estimated rent: $850/mo (under circumstances of normal home next door)

Cash on Cash ROI: 8.7%

Cashflow + Paydown ROI: 13%

Any advice, comments, constructive criticisms would be appreciated and helpful.