Should I back out from this investment property?

[Kadejah Johnson]

Hi,

I'm looking to close on a 4-unit for roughly 200k in a college town. 3 units are rented and I was able to talk to the tenants to see if they have any issues with their unit. A tenant from one of the bottom units informed me that there is a small leak in the ceiling and he pointed out ceiling stains and where the leak was coming from. The top unit reported no leak from his unit. The roof was replaced in 2020 but inspector found leak stains in attic. Also there is some termite damage. I am nervous because I am supposed to close next week. I am purchasing with a fha loan. I have a contractor coming out to inspect this weekend for repair estimate. How do I know to walk away? Should I walk away ?

[Brett G.]

@Kadejah Johnson

If you have an Inspection Contingency clause in your contract, you can walk away from the deal, ask the seller to fix items, renegotiate the sales price, or move forward with the purchase and pay to fix the issues yourself.

If the seller won't drop the price for the repairs, or fix the issues, then, is it still a good enough deal to move forward and pay for the repairs yourself?

If the roof was replaced just last year, the water stains may have happened before then. Ask your inspector or contractor where he thinks it may be leaking from.

The water leak sounds like a plumbing issue. Leaks will cause mold and rot. Maybe it's serious, maybe it's not.

Termite damage could be serious depending on the extent. Your inspector and contractor should be able to tell you how extensive it is and cost to fix.

You have to ask yourself if this is still a good enough deal, considering the extent and cost of the repairs, to move forward.

Good luck.