Making an offer on a BRRRR

[James Smyth]

I'm looking to buy a BRRRR property using owner financing and renting it out after the first year.

I ran the financials on the deal and think I can make it work if I get the right purchase price.

The property is a single family residence that has been on the market for ~100 days, originally listed at $420k, recently reduced to $399k. To make the deal work I need to get the house for around $340k. There is another offer that went stale from COVID that was in the "mid-300s".

When I walked the property, I noticed a number of issues with the property that would come up at inspection at which time I would ask for a price deduct; I estimated this around $27k (needs boiler, new electric service, old foundation that needs demo, underground oil tank...)

Should I consider those deduction in my initial offer or should I wait until we are under contract and allow the inspection report to bring them up? My concern is my offer may be overlooked because it seems to be less than the other and after inspection will end up at the same price?

[James Smyth]

@Andrew Syrios Thanks for your feedback!

I was leaning towards making an offer with the adjustments in the offer and trying to explain why I was deducting from the beginning and hoping that would help seal the deal. As a matter of doing business, I would prefer to be upfront and hope it prevents friction in actually closing the deal! 

You're saying I should aim to be at 75% of ARV? Any adjustment of that if you're buying a house that is a third of the size of the others in the neighborhood? There is lots of potential to expand the home and increase the value.