Really good deal or something fishy?

Question

Alight so hear is the situation. Found a property on the MLS listed at 60k. Says it's owned by a landlord and wants to get rid of it and has a current tenant in it who pays $900 per month and the utilities. Doing a little bit of research the property was sold last year at 35k and no updates were made. Small 2-1 in this area typically rents for 650-700 on an updated property this small. My concern is why is this property being sold with a tenant who is paying way over market value. I do get the resale because of the market. My other concern is, is this fake and the tenant is squating on this landlords property and they're dumping it because of the situation they are in or am i overthinking the situation. This will be my rental. We are scheduled to look at it today. This is in rural Ohio outside city limits if your wonder on pricing.

Justin Bailey · Answer

@Mateo Oquendo-Chandler alright I got some background info on what is going on. The landlord Is going through a divorce and is selling some of his properties, this was a property that his wife gave up to help settle there divorce. Once he acquired it, he jacked up the rent $200 on the tenant because of 2 dogs (who are really nice) we talked with the tenant and owner for quite some time after viewing the property. We put in an offer at 55 and they countered at 57, so we accepted the offer and the tenant agreed to sign a 1 year lease at $725. She was crying in joy... Long story short dogs shouldn't be used as leverage for living situations especially if the same tenant has been in the property for 5 years.

Justin Bailey · Answer

@Chris Seveney Hey I wanted to give you an update on this post from over a year ago. Tennats are in the process of buying the house from me. Will be making around 25k plus rent for the last year and half. I havnt put a dime in the property. And drove out to it 2 times. Great tenants and soon to be happy home owners

Remington Lyman · Answer

I would just ask your Realtor you are working with about adding this term into your contract:111 Investment Property Purchase Clause This Offer is contingent upon Buyer’s satisfactory review of all leases, rental agreements, deposits, past 1 years’ income and expense reports and within 2 calendar days after acceptance of this offer. Seller shall provide such documents and information, representing them to be true and accurate, within 2 calendar days after acceptance. During the pendency and term of this contract, Seller shall not change any existing lease, enter into any new lease or make any substantial alterations or repairs without the consent of the Buyer. Failure by the Buyer to so notify the Seller and/or Seller’s Broker in writing, within the calendar days, shall constitute an election by the Buyer to proceed with the transaction.

Justin Bailey · Answer

@Chris Seveney thank you! I'll try to remember to give an update here.

Kimothy Bynum · Answer

Can you get the rent roll from the current lease so you can check if they have been paying or not?

Chris Seveney · Answer

@Justin BaileyGreat job doing your due diligence and understanding the situation. That’s how it’s done.Good luck with this one.

Natalie Schanne · Answer

@Justin Bailey - rents went up 20% year over year so it is possible they accepted someone at new market rent or it is possible they accepted a tenant who had few other options due to the background and credit check or pet situation. I would ask for bank statements showing receipt of the $900 on time every month for six months. Some people are cashing out especially if they bought a property for cash (sheriff sale, foreclosure, direct from owner) and want to be able to re deploy it. I would be concerned about any big repair items that you may not budget for like a roof. I can imagine attempting to sell a property before I have to pay $10k for a new roof or hvac

Steven Foster Wilson · Answer

Let us know how the walk through goes? I feel like I always find out more when I do a walk through. Does he have proof of those funds from past months rent?

Mateo Oquendo-Chandler · Answer

I would be concerned why the owner wants out so soon. If it was bought on auction or as a foreclosure that could explain the low price from the last sale. The current owner could want out because they can double their investment without doing much rehab and sell quickly by selling it under market value. When going to look at this, I'd be on the look out for "patch" jobs. An inspection down the road will also confirm if its too good to be true or not.As far as the $900/month. I would just get proof that the tenant is paying that amount and is current. If the tenant is on a month to month then I would understand it being more than "average." I'd be interested to hear your thoughts after you have viewed it and evaluated it from that perspective.

Justin Bailey · Answer

@Justin Bailey PS the 60k is below market value as well. Properties in that area average 90k-120k which might be where the rent comes from.