Landlord wanting out of investment, help?

Question

Im not actually the landlord but I was recently speaking with my father in-law who owns a home in Evansville, Indiana. He has been renting it out for the past 10 years, no problems with keeping it filled or anything like that.

Here's his predicament, he bought it roughly 156,000 and recently had it appraised at 165,000. The current Zillow estimate puts it at 155,000 this year and 159,000 next year. He is currently renting it out at 1,100/mo but it is estimated on Zillow that it can rent for 1,350/mo

He has only been breaking even on it as a result of not raising rent over the years accordingly and has not lived in Evansville for the majority of his investment; therefore, this investment has been mostly a waste of his own time.

Their are 10 years left on the mortgage and 120,000.

My question for you all here is what options does he have to get out of his investment? Lease-option? refinance? Lein takeover to another investor?

Any and all input is greatly appreciated, and let me know if more information is needed?

Jay Hinrichs · Answer

Account Closed  as a fledging wholesaler this is a deal that has NO value to you.. unless the seller is willing to just walk.. and the seller probably does not want to jepordize their credit score.. so they are not going to do a sub too or other NO money down transfer title scheme's.

this is were having a real estate license is Key to success.. this would be a referral to a listing agent in that market.. so simply list it and sell it.. and you make 20 % of the list side commission for a few phone calls... Its what I have done for 40 plus years... I use referrals fee's for my yearly entertainment and travel expenses...

trying to wholesale a house that just breaks even on cash flow.. Has no upside potential ( most of mid west) and little equity.. is a total waste of your time.

Joshua Springer · Answer

Like Jay said, not sure why this wouldn't just be a list and sell.  He's likely to get more from traditional buyers then investors anyways.

Michael Totman · Answer

If I'm reading right you want to sell it somewhere between $120,000 and $165,000, likely on the lower end of this range.  That's a pretty thin margin for a rental investor if rent is between $1,100 - $1,350.  I would suggest your father in law sell it outright with an agent in the area.  Sounds like he just wants to be out of it, but if he seller finances it he just switches his cash flow from a tenant to a buyer and still has the headache of trying to collect payment without any control over the property. If he wants out, get out.  Try to find a nice owner occupant who will pay full or near full retail value and walk away with a bit of cash.  You might want to help the transaction for the experience, but no need to profit off your father in laws' emotion of getting rid of an old house.

Ian Walsh · Answer

This doesn't sound like a deal at those numbers.

Timothy Colman · Answer

Hello Diedrick,

You stated he has been renting the aforementioned home for (10) years with a purchase price of 156k, and now has a principal balance of 120k with ten years remaining.

Albiet he has been breaking even, the above numbers show about 36k in equity gained (not to mention appreciation, which you stated is now 165k).

Therefore, he is looking at between 36k and 45k profit if he sold today.

If his lease terms are 12 months, then I would raise rents to the estimated amount of 1,350 to produce cash flow, as well as continue to build equity.  If the tenant can't afford it then they are out of there and it's time for new tenants.

I would personally not sell at this point due the amortization of the mortgage.  He has likely been paying a hefty percentage of his monthly payment to interest over the past ten years and is only now starting to see the scales tip in favor or the principal vice interest.

Account Closed · Answer

Thank you everyone for the replies, after speaking with the FIL about his options I have learned a new bit of information which is that his wife does NOT, want to sell the property but he very very much so DOES want to sell.

Will keep @Derrick Powell and @William Higdon in the loop on what the married couple and owners of this home decide to do when that time comes.

Account Closed · Answer

@William Higdon

Great to informerly meet you as well, I have not yet operated in Evansville but have a decent enough amount of family there to justify doing business in the Ville. Will contact you directly as well as @Derrick Powell

The more minds the better. As far as any sort of structured deal being done, at this point my Father in-law is inquiring about possible exits. I am currently working on a wholesale contract with him and his wife (mother in-law). After that is done I'll be able to have more solid numbers to show you on this property.

New information on it as of yet is that it is a 4 bedroom, 2.5 baths, and 2,286 sq ft. There are also very desirable tenants already in the property, and have been in it for 2 years now. One scientist and one stay at home mom, both of which have family in Evansville, I believe they actually moved there to take care of their mother/mother in-law so signs point to them not going anywhere anytime soon.

@Timothy Colman

Thank you for that insight as well, that was definitely in the midst of discussion with the current owner(s) (Husband and wife) of this property. I wouldnt sell either, personally, but it is apparent that he just has no interest in holding onto the property since it was more of an incedental investment than a deliberate one and he has a career that he enjoys very much instead.

@Ian Walsh

Would you care to elaborate upon why you don't see this as a deal? From the estimates I have crunched thus far it would appear that, to the right investor, this is a pretty easy value add to a rental property investor.

-There are great tenants in it already

-Only the roof needs replacing

-I could get it under contract for the amount that is left on the mortgage and broker a deal to an investor that is still well enough below market value to create a winning situation for all parties involved

These are just my observations thus far, what am I missing currently that makes you weary? Not attempting to prove you wrong or discredit you by any means Sir, simply curious as to your complete thoughts on the matter.

Account Closed · Answer

@Westley Bachmeyer

Thank you very much for the detailed response. owner finance was my intial thoughts for him as well. It is evident, after speaking with him, that he is not at all interested in holding on to the property regardless of potential profit. I think that is due to his initial relationship in the home was not as an investment but rather a home he used to LIVE in, then kept after moving out. So he is just wanting out entierly.

I'll have to look at some more accurate comps to see exactly what he's working with. Thank you for the direction Sir!

@Justin Whitfield

I asked him the same and he has made it clear that his only interest is in selling the home to someone else. I guess he's just not at all interested in holding on to it; it turns out he is not an investor, rather he is someone who simply owns a home that he doesnt live in and never tied up the loose ends of selling it so he slapped some tenants in it to not have to pay the mortgage with his money. So he is just not interested in maintaining it as an investment because he has emotion and time invested into a different career that he loves.

As for the realtor, that is defintely an option that we will be putting on the table... I did nto consider that he coould potentially profit from that as well. Thank you for that!

@Jeff Rabinowitz

He has not! I actually have never heard of that option as far as selling a home is considered. (Albeit I am still relatively new to the Real Estate scene). I'll have to look into that and the Balloon payment you've mentioned, as I am not familiar with that either.

@Derrick Powell

Will do, Sir! Glad to informerly meet you! I'll actually be bringing my services to Evansville, IN in the future as a wholesaler. Still getting established in Savannah, GA and Denver, CO though. My question to you then would be, I have never wholesale'd a deal with a mortgage to be paid off still.

Would something like that work in this case, say for example there is 120,000 left to pay...I get under contract to sell for that amount so the the seller breaks even, and then wholesale it at a number that is far enough below the Fair Market Value? Say it is worth 160,000 would I then be able to wholesale for 140,000? Allowing the new investor to have enough margin of safety to cover closing costs, vacancy period if the current tenants were to be evicted for whatever reason the investor see fit? Repairs etc..? (It doesnt need any repairs as far as I CURRENTLY know, the owner says the only thing that may need done is replacing the roof.

This is a hypothetical situation at this point of course, just fishing for feedback on the criteria of a future buyer.

Account Closed · Answer

Thank you for the replies thus far, everyone!

William Higdon · Answer

Account Closed is unable to help move the property for some reason, I'd like a shot at helping. My network is still growing but I do have a few Buy n Rent Investors looking for properties in Evansville, In.

Feel free to contact me on here through Dm, or via email or phone. The owner does have options and you can cash in to if you find the right partner on the deal.

Best O'luck,

Wm

Landlord wanting out of investment, help?

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