Why does this look so scammish?

Question

First, to introduce myself.  I am really new here and soaking up a lot of information.  I currently have 2 rentals, only because my parents raised me to never sell a home after I bought it...to just rent it out.  One of them breaks even each month after PM and the other is about $400 over expenses including PM (not even close to 50% on a 1400/mo rent based on what I've been reading), which I thought was great for a SFR until reading about the 50% rule on this forum.

Oh well.  Learning a lot, and have been scanning CL looking at the various postings to see that most would never fit the 2%/50% rule.

And then I find one like http://kansascity.craigslist.org/reo/3154117441.html.  If the link is blocked, search Kansas City CL for posting 3154117441.  This guy has a full duplex listed for 25k and is talking about how it is, and I quote, a "CASH FLOW MONSTER".

First thought that comes to mind is, if that is the case, why isn't he keeping it?  All sorts of sirens go off in my head.  I'm not looking to buy right now, just learn, and this one screams scam to me.

Do all good deals look like scams?  Or are there just that many people trying to pull a fast one to get out of big repairs coming up?

Would appreciate insight from the awesome educators who participate here.  What a great forum.

Regards,
-C

Ned Carey · Answer

Well all scams look like good deals :-)

You will sometime stumble into really good deals. But really good deals don't stay on the market long.

If I told you  some of the deals I did you might think they were scams. Yet they were legitimate deals. However most really good deals are not found they are negotiated. Often some of the best deals don't start out as looking like good deals.

Jake Kucheck · Answer

Marketing of any kind is typically somewhere in the spectrum from embellishment to blatant misrepresentation.  Luckily, you don't have to buy anything based on marketing, you buy based on analysis.

People's reasons for selling will vary, but really don't matter that much.  If he is selling because he is trying to avoid deferred maintenance, that will be apparent in the property, will it not?

You should analyze this deal like you would all other low end, cash flow based rental deals:

Rent/(Purchase + Rehab) = ???

Now the answer to that equation is likely a single digit %.  In some areas, 1.5% is good.  In some areas, 2% is good.  My personal best is 9%, but that is the exception rather than the rule.  That property also happens to be in an area almost all investors wouldn't touch.  You have to compensate for risk somehow.

Account Closed · Answer

It's not a bad deal if the rest of the block is in good shape, looked at a duplex in that area a while back and they wanted 15,000 for that one and the whole block was rough and mostly boarded up.  Whatever you have figured for numbers, up your maintenance and vacancy numbers up.  FYI, look at the zip for this area and 64130 is considered the murder area in KC.  You would be better off finding something in a more stable area

Carraig Stanwyck · Answer

Jon Holdman.  Thank you and everyone else for the replies. I currently do live in Texas but work looks to be taking me either to KC or Tampa.  Either way, I am not ready to buy...still have too much to learn.

Thanks everybody for your input!

-C

Eric Blackford · Answer

Mom...MOM...is that you?!

Jon Holdman · Answer

Uwe S., it may have been purchased from the bank and is now being rehabbed.  Recording doesn't always happen very quickly.  I didn't see anything this cheap when I was checking out this area, but houses are much cheaper than here in Denver.  The area did not appear to be a war zone.  I have a suspicion this one needs more work the ad implies.  The area to the NW of this particular property seemed nicer, too.

That said, the ad could be totally bogus.

Uwe S. · Answer

Jake Kucheck,
by county recorder is this propertie bank owned, so I don't think a bank made a craigslist ad like this.

-Uwe

Uwe S. · Answer

Hello Carraig,
I got the real address of this propertie, don't want to write this down here.
Checked the data and owner is a bank actual, with taxes he is right actual taxes $881 and tendered (don't know what this mean).
If you want I can give you address and online search page for tax check. So you can do your own DD.

Update: Just found 3 personal taxes for same address with some dues there.

-Uwe

Jon Holdman · Answer

Are you familiar with that area?  I'm not too familiar with KC, but I have driven around some of those areas.  That's a bit further SE than where I looked, though, so I don't think I've actually see this specific area.  I drove the area just north of there, roughly from Swope north to 31st east and west of 71.  That area east of 71 is a rougher area.

That's not necessarily bad.  I continue to consider KC for lower prices.  Don't know what rents you could actually get in this area, though.

You list your location as Corpus Christi, though.  Yo have to be careful not to evaluate properties in some other area based on your local prices and expectations.  This doesn't appear to be a scam to me.  A good deal?  I don't know.

Why does this look so scammish?

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