What investment strategy would you pick? (MOTIVATED SELLER)

[Frank S.]

Motivated seller selling me a 3/2 SFR but not sure what strategy to use.

Property Details:

Written Appraised Value - 134K

Purchase Price - 90K

Rehab - 15K

Rent - 1,250/mth

Tax Rate - 2.54%

Strategy 1:

20-year mortgage, 4.63% interest, 20% down

Purchase, rehab out of pocket, rent it, pay off the mortgage FASTER but collect LESS passive income.

Strategy 2:

30-year mortgage, 4.75% interest, 20% down

Purchase, rehab out of pocket, rent it, pay off the mortgage SLOWER but collect MORE passive income.

Strategy 3:

25-year, 4.125% interest, 45% down

Assume the current mortgage and pay the owner their profit of 40K. They owe 50K to their lender. This would require the most upfront but get the most passive income.

Strategy 4 (BRRRR):

Purchase the property and rehab with cash out of pocket. Rent and season for 6 months, then cash out refi. This would get me the property essentially free BUT would leave me with almost no passive income (break-even) because the rent is not high enough, the mortgage would be for 134K, the property tax is not helping and I would have to close twice in a short period.

What am I concerned about:

1. Not collecting passive income

2. Tying up my cash, I'd like to purchase with as little as possible

3. Property tax appraisal

4. Taking 30 years to fully own

5. Closing multiple times

WHAT WOULD YOU DO?

[Larry Turowski]

@Frank S. It's doesn't sound like a great deal but may be as good as you can find for now.  Your strategy will depend on your goals.  Other people will have other goals and what they would do may not work for you.  For instance, some would flip it and you didn't even mention that.

I will say this.  Definitely not #3 because the bank could call the loan and you'd have way too much money down anyway.  #2 gives you more flexibility than #1.  The interest rate is almost insignificantly higher.  You can always pay it off faster if you want.  For #4 wouldn't your mortgage be closer to $107K?  That is 80% of $134K.