Advice on potential Subto

[Paul Baldwin]

I have a potential subto deal, that could be a great cash flow opportunity for someone, but the entry is a bit steep. I’m considering taking this down myself if I can’t sell it, but wanted to see what the community here thinks.

The property is a five bedroom two and a half bath victorian era home in Greeley, CO. The ARV is around 525k - the property is currently listed at 450k. The owner's mortgage balance is $315K and they have an interest rate of 3.5% and the PITI is 2126. The main house(first and second floor) is in reasonably good shape for a home of this era - most of the original woodwork, flooring and tiling looks good. The kitchen could use some cosmetic upgrades - counters and flooring and the full bath upstairs needs a full update.

There are two bedrooms and a full bath in the basement, which has a separate entrance. The bathroom needs a full update and the kitchen is only about 50% complete.

The current renter is paying 2600 for the whole house, but when fixed up a bit, the upstairs could likely fetch 2700 and the basement could probably get 12 or 1300. There is also a 3 car garage in the back, which could be rented separately and room to store an RV in the back as well.

I’m considering offering the seller 85K, the realtor 12k and then put in around 35K to get both up and down units rent ready(might be able to do it cheaper, especially since it’s likely a rental). So $132k all in, or if I wholesale it - $142k or so.

Is this just too steep an entry fee? With total rent coming in at around 4k/month minimum, you’re looking at 1800 a month in cash flow for a cash on cash return of nearly 16% . Is this a deal?