What to offer on FSBO (if at all)

Question

There's this house close to me...

Lady bought it cash (I think) and lived in it for a few years.  Working on that buying info now...before I have to ask her.  She added on to it, prob not permitted as we're outside city limits, but it's VERY well done, and the house is very nice.  It's (now) a 3/1, probably 1100 sq ft.  Tax Value is $59,890 and doesn't show the addition.

She moved out about a  year ago, and had it FSBO for like $89,900, don't know what offers she received, but never enough to satisfy her.  As she moved back in a few months ago, and it's still FSBO.

Again, this is a NICE little house in a great neighborhood of mixed contruction.  Rents would probably go for $800-900, as we're 20 minutes from "town" either direction.

To get into rental shape would literally be under $1K.

Thanks for your thoughts :)

Bryan Silver · Answer

Yes sir.  That is correct.

Shane Woods · Answer

Good to know about the %equity.  And I appreciate your feedback about moving on.

So, to make sure my math is right, to even get a loan on it, based on your statement, I'd have to be able to pick it up for let's say ARV=$75,000 - 40% (30,000) = pay no more than $45,000 for it just to get a loan...

Makes sense why it's not a deal if HM or PM is the proposed financing.

Thanks again :)

Bryan Silver · Answer

I look at everything from an investor's perspective.  Thus, it would be difficult for me to purchase an FSBO unless the property had a lot of built-in equity; being sold well below FMV.

Based on what you stated above, recent sales/comps in immediate area are not strong.  If that is not the case, avoid this deal and move onto the next.  One thing I can say....Private Money/Hard Money Lender will not give you a loan unless their is sufficient equity (atleast 35-40%) in subject property.

Shane Woods · Answer

I haven't done anything.  Haven't had a chance to call and feel her out yet...plus, I have my reservations.  I don't want to strike up the conversation, then not be able to DO anything because my private lending is not in place yet, and I'm not sure I'd be comfortable assigning without "help".  Assigning makes me nervous for some reason.

That being said, what I'm asking all the great BP'ers is, regardless of her situation, assuming it's free and clear, how much should I offer?

I don't see much on here about buying houses for rent that are nice and need very little work.  I'm not ready to LL, so I'd most likely wholesale this one.  Maybe seller finance to the LL.

Thoughts?

Joseph M. · Answer

Any updates on this one , did you make an offer on the house?

Take care

Shane Woods · Answer

No good comps really.  Everything that's sold in the last 6 months is either 2 baths and more sq ft, or old, not rehabbed, but stil lliveable.  Similar with 2 baths go for $60-65 per sq ft.  Older non rehabs, 1 bath go for $45-50. Older 2 baths $50-55.  Not many nice 3/1's being sold at all. Hard to comp.

Only way to get my wife into this is to build another bathroom.

Joseph M. · Answer

Shane, you mentioned tax value but have you run any recent comparable sales? Tax value isn't usually too helpful in determining true current market value...although it sounds like if you could get it for under that tax value amount with $900 rent it would be a decent deal cash flow wise since it sounds to be in great shape. With an asking price of $90,000 though that's a long ways down in price. At around $90,000 with rent of 800-900/mo that's not a great buy and hold deal.

I guess you need to also decide if you want to buy it has a buy and hold or to live in it. Maybe you could convince her by explaining how it is better to own versus renting?...and she could put more of her own personal touches on the property (women seem to love that idea!)

Shane Woods · Answer

On a side note, my wife and I have considered buying this house for ourselves, but she doesn't want to go from one tiny 3/1 to another tiny 3/1...so you know how that goes.  Any words of advice to convince her?  We're currently paying rent in the same neighborhood.  My rent price isn't relevant though, because it's a "friend/favor" deal.