Questions Regarding Analysis on Distressed Property

[Ryan Ness]

I met with a local owner/investor in my area and have discussed the possibility of acquiring a property he is interested in selling. He was kind in providing an inspection report, but in the current condition, I do not see the property being bankable. There was some discussion about potentially offering a contract sale but the terms proposed so far have been requiring a balloon in 4-5 years. This would allow for the renovations to take place, with the potential to refinance out of the contract, but violates a principle I operate under of long-term, fixed-rate debt.

Given that I have the inspection report, I am curious about developing a framework for evaluating a potential deal. Do you generally have contractors walk the property? I also can provide these contractors with the inspection report, just for an estimate on the cost to repair.

I will need the input of both a general contractor for exterior repairs as well as a structural engineer to evaluate the foundation. There was one floor joist noted that had rotted away (which would be baked into my analysis and negotiation).

The seller is open to working on the price, if conventional financing is the only option), and understands that the property is not bankable in its current condition, but would like to provide the opportunity not only for the owner to be able to sell for as close to what they would like to get for the property, but also to get the property for a good value (good enough condition to operate). I appreciate any feedback you may have!