Potential Flip-seller wants cash only offer!?

[David Robertson]

Background: I am still looking for my first investment property. I have found a 3 bedroom, 1 bath for approximately $30,000 and I think it can sell for around $80,000 to 100k with ~20k in renovations. It is a 1.5 story bungalow with original woodwork, hardwood floors and is in a decent blue collar neighborhood with good schools. The major renovation issue is the upstairs master bedroom had the drywall and electrical ripped out by a previous tenant, it's essentially a clean slate. In the upstairs bedroom I am planning on adding a master bathroom and finishing the drywall and electrical. The rest of the house needs typical cosmetic repairs.

I walked through the home today with my agent and I thought the property had potential so we started laying the ground work for an offer. The property is owned by a Real Estate agent and my agent contacted him to see why he was selling it and get a background on the property.

The owner/agent said that the he had a couple of offers before and was not willing to sell the house through financing. He wants cash only...He said that the home has some electrical issues from the previous tenants and didn't think it could pass inspection or meet appraisal and therefore he doesn't want to waste his time with a lender....

My Thoughts: I am under the impression he has received other offers and they failed inspection and the financing fell through. I would like to get some innovative solutions/negotiating ideas for offers to convince the seller to sell to me. I am planning on calling him tomorrow to inquire more, but I would like to have some creative offers available at the time.

I would like to use financing to purchase the property and finance the renovations through cash. I was considering offering $26,000 through financing with $6,000 down. I would like to keep my cash investment to a minimum and save cash for financing the renovations.

If he wants a cash offer so bad maybe I should offer a cash offer significantly lower than asking price around $15k. Any other ideas?

Thanks for your help.

[Jon Holdman]

Absolutely do not do any work on any property that you do not own.

Owner financing is out of the question here because he's so upside down.

You only real hope is to get a short sale approved. He's so upside down this seems unlikely. My money is on this one going to foreclosure.

Ben is right about not getting hung up on any particular house. Consider 100 houses, look at 20-30, make offers on 10, buy 1.

Nobody wants to pay hard money rates. But it HMLs are the only ones right now who will lend money on junk houses. An alternative is go get a line of credit of some sort. Some banks and credit unions do still do lines of credit in the amounts you're talking about. You can also use credit cards to purchase materials. I wouldn't do cash advances, though it might work for a tiny deal like this. The rates are going to be as high as or worse than hard money.