Seller Deferred Maintenance

[Geren Knight III]

BP community, I am in the process of purchasing my first rental property. I have negotiated a fair price with the seller. The property ARV is $87,000. The house requires some maintenance before it is ready to be rented. I negotiated a $40,000 purchase price. during the inspection and due diligence process I uncovered that the furnace/boiler was past its life expectancy and has never had any maintenance done on it. It was running in the red. I spoke with my contractor about the boiler and he indicated that it would be around $6800 to replace. There were other maintenance issues such as the hot water tank needing replaced and rot on the front porch that needed to be fixed. I have asked for a reduction in price down to $30,000 to cover the three items, boiler, hot water tank, and the front porch. The seller has been great to work with and has fixed other items on the inspection report but it's not willing to fix the rot or the boiler. My concern is that the positive cash flow is less than $100 a month with capital expenditures and monthly maintenance only at 5% each. These numbers are also based on only putting $5000 in it for paint and some flooring. The house is in a good section of town with an immediate increase in equity of at least $40,000. Should I push for $30,000, walk away, or accept the sellers offer of $38,000?

[Jaysen Medhurst]

To start, @Geren Knight III. 10% combined for Repairs and CapEx, probably isn't going to cut it. Especially, on older, cheaper properties like this one. That said, you'll be all in for ~$50k. Maybe just do this as a flip, if it won't cash flow with the proper reserves. Could be a quick $30k.