Need your Thoughts, Tenant in place, undervalued property

[Gabe Bouldien]

Hi BP, here is the scoop. I know the current landlord and was just offered a rural rental house on 1.7 acres with a long term tenant in place before he puts it on the market (new windows, new plumbing, new AC). Current tenant is paying $600/month, but rent could easily be 700-800, and the tenant's lease ends in February 2022. He is asking 80k for the house, but the property appraisal should fall between 95-115k. I have the cash in hand to buy outright under my LLC, which would cash flow ~$500 (after taxes, insurance, etc.). Or I could pay cash, and then cash out refi (85% LTV) in a month or two to get my money (and then some) back to buy another property. However, doing it this way, i would be pretty much be breaking even in cash flow with the current lease agreement of $600/month. But the cash out refi would put 4k-20k into my LLC's pocket for another property.

Also, I was just told by a family member that if I purchase this house under my LLC and refinance it, the mortgage would show up on my personal debt to income ratio? I thought this sounded odd. Is my family member correct?

What would you do if you were me?

Thank you in advance!

[Michael K Gallagher]

@Gabe Bouldien Even if you break even every month, is the 5-10 year outlook on the property promising?  could rents go up to $1200 in the next 3 years?

With regard to the mortgage showing up on you personal D:I ratio...Is your friend a real estate lender in the investment space?  If so I'd listen to them.  If not I'd ask your lender that you plan to use for the deal, they will be able to guide you well.