sold for 13k in '05 now asking for 20k in '15 too much?

[Skylar Dejesus]

I have a property I am considering buying I believe I am going to keep it as a rental due to low operating cash but can still possibly flip. 

I am looking at a 700 sq ft SFH 2/1 built in 1933. The owners and I have came to a price of 20k through owner financing with 7k down.

I am wandering if I am over paying for this property. I have checked with my real estate broker and comps in the area are selling between 40-55k. 

What I am questioning is if I am paying for the property? On the tax records the property was sold for 22.5K in '04 and in '05 is was sold for 13k. 

Its going to defiantly need some repairs also.

BP experienced investors do you think I am paying too much for the property? My plan was to get the house inspected and use that as a negotiating tool to satisfy a lower price because the family received the house through and death and just want to cash out quickly. Thanks in advance for your responses.

[Joshua Beall]

There's not enough details to say for sure, but here are a few key things to remember:

1) With residential properties, it's all about comps. You mentioned that comps in the area are selling for 40-55k. If those really are comps for your property, in its current condition, then you're getting a great deal.

You mentioned the property needs repairs. If those 40-55k comps are "after repair" comps, then you need to factor in the cost of repairs.

2) What the current owner bought it for in 2005 is largely immaterial. What matters is what it's worth today. You can use the price they bought it for as a data-point, but it's really secondary to the what data you can find in recent, comparable sales.

Hope that helps! Make sure to keep us posted on your progress!

  -Josh