Advice- Need a solution, in a pickle- SFH Rental

[Erik R.]

Hello All-

I have a B-location property I am in negotiation to purchase, and need some advice to create a win win if possible.

Background: The property is in Metro Detroit Michigan, B location.. across the street from a school on a dead end street, down the street from a park. Comps value the place at $99k, I can get $1200/mo rent. My offer was $91k site unseen, would hit my ROI and cash flow metrics assuming 30 yr mortgage and $5k of additional improvements needed. HOWEVER- after inspection and research have uncovered some issues....

The house was flipped by an aspiring real estate investor who acquired the place as a wholesale deal (re-assignable contract)....did the flip without pulling permits from the city and therefore sunk money on CapEx (I.e a new kitchen) which now requires more investment to be within code, and also has a list of city inspection issues which requires even more investment (driveway cement repair, new chimney mortar, front porch cement work). Note- My team went to city hall, talked to the city, got the inspection list from them directly.. they aren't happy with this guy at all.

His business case is already in the red, he's desperate to get rid of the headache but can't sell it without a clean COO- yet has no more money and is already behind on $40k of private money... He also seems very negligent, not just naive..

He has netted $105k on this property all-in through acquisition + investment, I need it at $91k for my math to work. I want to help this guy out but I honestly don’t know how to create a win win without this guy bleeding severely, and I won’t acquire something that doesn’t meet my numbers.

I've considered a land contract that helps him with his debt short term, puts all owness on him to bring it to code, and keeps my ROI strong... also thinking of just offering a cash offer I'm comfortable with, taking ownership of all improvements with the city based on a solid SoW, then refinancing.

About to walk away but thought I’d check with my creatively - minded fellow BPers to see if there’s a solution I haven’t thought of.