Just Made My First Offer

[Paul Stout]

I just made my first offer!  I'm nervous, excited, nervous, can't sleep, nervous, happy, scared and did I mention nervous!  Here is a quick snapshot:

Coworker retiring, needs to sell to move out of state to help his daughter, owes $50k on mortgage. Hasn't contracted with a broker but had one do a market analysis for him. Came back just under $180,000. He was skeptical based on same house slightly larger and newer inside Two doors down listed at $159k for over a month with no offers. I ran comps of properties within 1 mile that have sold within 6 months and two within one block currently for sale. I come up with an average of $72/sqft with very little variance which equates to just over $130k. I explained in my cover letter how I came up with my number and stated that all of these people paid 6% to an agent/broker on their final sale price. Spread in the area seems to be running at almost 10%. I offered $130,500 (1812 sqft). First option was traditional with 20% down and lender finance and a rent back of $1275 until he is ready to move in December. Rent goes to $1400 Jan 1. Optional offers include purchasing an option to buy that starts when he retires near Thanksgiving and expires at the end of January. Option two was $60k down and seller carries for 15yrs at 5%. Same options on immediate or option purchase. Analysis shows $1400-$1500 rent for comps. Used $1400 in calcs. Traditional nets +- $125 cash flow with 5% for vacancy, capex and maint. and 12% property mgmt. Typical pm is 50% first months rent and 10% per month. Investor I know has had no vacancy in the same area for almost three years. Owner carry option cash flow is just under $100. ROI not great for either option but I'm ok with it. IRR should be good due to it has new roof, siding, windows, AC, and washer/dryer. Kitchen appliances, water heater and furnace at half life. What do you think?