Estate Sale

[Anthony Silver]

Hello BP,

I am an investor newbie who only has a couple of deals under my belt. I currently have 3 units that cash flow pretty good, but I'm looking to expand my passive income portfolio. A couple of weeks ago I was approached by a friend of a friend with a deal. She and her siblings inherited 4 SFR's with loads of legal issues. They have possession of 3...One needs total rehab, one needs minor rehab, and the other needs to be torn down. They have fines and tax liens in access of 8k. I could get all three for less than 10k.

With the extent of work needed, I was ready to walk away from the deal until I saw the forth house.  It is a fully rented duplex that their mother did a Contract for Deed in 2008.  The buyer was to fulfill the contract in 2012 but never did.  For the last 3 years he's been collecting rents, but not paying taxes or loan payments.  My seller has inherited this problem with no means to retain legal representation to rectify the situation.  There is a tax bill of 22k on the duplex.  So if I buy, I could get possession the forth has relatively easy.

I have nothing signed with the seller, but I made it clear that I would consider a deal without the forth house.  She just wants to be done with the ordeal.  I believe that it will take 65k to tear down and rehab all the units, so that makes 97k for 4 units to which will rent for 800/month. So I'm looking to cash flow about $200 a door after expenses. 

My question is how should I approach the purchase agreement with the seller to protect myself in case I'm not able to get the forth property. Or is this deal even worth the time?