Off-Market Deal - Looking for some guidance and opinion

[Anthony Varela]

Hey BP,

Thanks for taking the time to read.   Newbie here with only two properties, primary and one accidental rental.   

Just got off the phone with an owner looking to sell his mothers place.   Knowing she was moving I asked about an off-market deal.   After talking briefly on the phone with him, I got some good information and my first thought was to bring it here to discuss with investors more seasoned than I.   

I am in the Portland, OR market and finding deals here that pencil out is extremely difficult.   I knew that in order to find anything I needed to look off-market.  The house is a 3 bed 2 bath - 1,550 sq.ft.  Local comps are selling for $325,000-$350,000.   As mentioned, she was in the house for 40 years with minimal upkeep in the last 10-15 years maybe.   The owner's son told me they owned cats for many years, and it would need new carpets, paint, and curtains.  I imagine it would need some real TLC in the kitchen with renter level upgrades, and probably the bathrooms as well.   

I asked flat out what they were looking/hoping to get, and he said if the house were in the tip-top shape they'd like $400,000, but given the condition, they'd go as low as $340,000.   I told him I didn't want to make a low-ball offer and upset him without seeing it, but reminded him I'd be using this for an investment and I need it to pencil out.  I'll be taking a look at it tomorrow and making an offer.   I was thinking there might be at least $20,000-$40,000 needed in repairs and updates (pulled that number from the sky really... thinking kitchen, bathrooms, carpets, windows(?) and paint, plus maybe the roof and some lawn care).  Without seeing inside, I was thinking $250,000 was my starting point.   

Here are some plus sides - We are in a highly desirable area with 70/30 owners to renters.  I live 5 houses down and therefore want the rental to remain highly valued.   Rents are about $2,000 in this neighborhood for a 3bd/2bth house.   We are adjacent to the top-rated public elementary school in the state.   Walking and biking distance to shopping and dining.  One mile to the highway onramps (minimal noise - buffered from the beautiful old growth Oregon white oaks).       

I guess my first question is this, how do I begin to assess the value of the work needed as a noob.   I'm handy (currently replacing my own windows)  I can do some light stuff, but run my own company fulltime and don't have a ton of time, will hire a lot out.   And, finally, going off the advice of a lot of the podcasts, if you feel a little bad about your offer, it's probably just right.  Is that good advice?    

Secondly, I can finance one of two ways. Take out my own HELOC for the down payment and finance through the bank, or possibly secure hard lending for a quick loan to secure the property, then sell my condo rental and pay off or down the hard money LTV and refinance with a conventional loan. Any thoughts on this?

Thanks in advance!