Will I have trouble getting a mortgage loan on a hoarder house?

[Paul Dodson]

Hi all,

I've done a couple flips and I'm looking at purchasing my first rental property. Asking is $100k, which is far under market, but the current owner is an elderly woman with tons of pets who has it stacked to the brim with stuff. Overall, however, the house is livable -- the exterior is well maintained, there are no major problems in the interior save some cracked drywall and a few water marks. And, weirdly enough, it's clean -- no evidence of infestation or anything. There's definitely a lot of clutter and cats, but it smells fine, and where you can actually walk it's very well maintained.

The sale is contingent on the current owner finding alternate housing, and she is willing to rent back. I'm not totally against this if she can pay a market rate. But in that case I'd be unwilling to get into a hard money loan which may put me in a position where I'm either hemorrhaging money or evicting on old lady out of the house she's lived in for 50 years.

I see two options here:

1. Go under contract and wait until she finds alternative housing to close, get a hard money loan, and BRRRR.

2. Close ASAP, get a mortgage loan on the property as-is, allow her to rent back, and rehab it when she leaves. Then get a HELOC to cover flipping expenses for other projects.

The way I see it, option 2 lets me see profit immediately. The only hurdle would be actually getting the mortgage loan and average priced insurance. Will I have an issue with this? Should i just wait to close until the seller is ready to move?

Thanks,

Paul

[Paul Dodson]

Thanks all.

My agent notified me this morning that the property went pending -- they took the first offer and their agent didn't give us a courtesy call or anything. That tells me they may be in dire straights. 

At any rate, we are on backup, and you've given me a lot to consider. @Jeff S. I'm very conservative in my estimates -- I'm assuming $40k rehab for this place -- but you've convinced me not to get into a rent back situation. Anything could be hiding.

Thanks,

Paul