To walk or not on turnkey

[Elizabeth Njuguna]

Hello!

I recently had some inspections done on a turnkey property and got some less than stellar findings back . The biggest item being a Sewerline needing to be replaced . Purchase price for home is $88000, it appraised for $91,000 . Quote for replacement of Sewerline is $5000. Seller is saying they are unable to repair before closing , they suggested increasing purchase price up to $91,000 to finance portion of the repair then I pay the remainder out of pocket. Cashflow wise it eats up much of the 2 year cashflow. Rent for property currently tenanted is $900. I was originally accounting for just 10% Capex & maintenance given this is "turnkey" with new roof, hvac, electrical, flooring. But now it would be more like 10% capex for 3 years. I didn't want to go into this having to do a major repair from out of state especially , I imagine such a repair would open up another can of worms. The area is looks to be appreciating at about 4-6% annually (but I again I'm primarily investing for cashflow not solely banking on appreciation) it's in a C class area in KCMO . So my question is is this a deal worth walking away from in the grand scheme of things?

[Jeff Lewis]

I would have them pay up front for the repair or hold in escrow until it is repaired. No exceptions. Always be willing to walk away from any deal.