Trying to buy the neighbor's house

[Carl C.]

My partner and I have been on the lookout for our next potential deal. We have one college rental and are looking for the next. A few months ago our next door neighbors listed their house for sale for $210,000 which would really be the very upper end of similar sales in the neighborhood. The owner has been in the house for 70 years (he was born there!) and is meticulous about maintenance. The house needs nothing. so we talked a while back and said we were interested. They have no mortgage and are looking to get into a newer house with no stairs and less maintenance ( and out of the now-college neighborhood). We made an offer of $180,000 understanding that they need time to find a new house and they are not emotionally ready to let go. We talk every now and then with them and so far no one else has made an offer on the house. They didn't reject our offer and they didn't accept it yet. We haven't been pushing because slower has been better for us so far. I know I can get $2600 for rent for the house with estimated monthly cashflow of around $1200. There are a few other houses in the neighborhood that are for sale that are priced about 50K lower with unknown repair needs. One in particular I know I could get similar rent with about $200 more monthly cashflow. Having read a lot on biggerpockets recently I can't help but think that the house for $130,000 may make more financial sense (depending on repair needs) even if the house next door is more convenient. I'm going to set up an appointment to see the $130 house as soon as I can (I have a full time job so it ain't easy) But I'm curious what you all think about getting a house near your current investments. I'm thinking economy of scale for snow removal and lawn mowing. But is that enough to make it worth it? Probably not huh? 

[Carl C.]

@Robert McAleer Yes. I do have an update. Much has changed in 5 years. Much has stayed the same. We ended up buying th house from our neighbors for 182,000. It was a nightmare of a closing. Tears being shed by the seller’s wife, their attorney kicking us out of his office saying all sorts of nasty things about us, etc. The house had asbestos wrapped around the pipes in the basement. We had to have that abated before the bank would let us close. The former owners ended up staying an extra week or two after we closed then the house sat vacant for seven months because we closed at the wrong time in the student calendar. 

We ended up renting the house to the sister of one of our other tenants along with her friends. We were getting 2700 per month in rent, cash flowing around 1200. It’s been great having two houses right next to each other. Mow one, mow them both. The convenience has been great. This past year we found we had to reduce the rent a little to find tenants. A large developer built a big student housing apartment building between us and the school and took about 200 houses off the market. It’s been a disaster for many landlords. We do still have tenants but we had to shift to renting individual rooms rather than to one group of friends. This year will be the test to see if we should continue with this property or try to sell it. The market is a bit flooded right now with landlords trying to get out. If we can ride this out, I think we might be alright.