Was I nuts to walk away?

[Adam Pearson]

I'm a relatively new buy-and-hold investor from the Seattle area and wanted a second opinion on a deal I recently passed on (either so I can sleep better at night knowing I made the right decision or re-open the conversation if appropriate).

The property is on Camano Island, WA and sits on a large lot with sweeping views of the Puget Sound.  The main house is a mid-60's 2 bed / 1 bath, and there is a large detached garage + studio apartment.

This property was not on the market when I contacted the seller, but he was absentee and in the process of preparing it for sale.  He lived in the house for ~10 years and rented it out the past year and a half.  His job was recently transferred out of the area, so reasonably motivated to sell.

Price: $240,000

Rent: $1,300/mo**

Utilities: Paid by tenant

Taxes: $250/mo

Cash in: $65,000 (25% down, closing costs, and $5-10k repair/make ready (conservative)

**The previous tenant paid $1,300 total for both units as their mother lived in the studio.  I figure I could rent the main house for $1,150, studio for $350, and detached garage as a storage unit for $100.  This would total $1,600/mo.

Other considerations:

- Older septic system

- Great set up for a shared laundry

- Main house is in pretty nice condition as the owner had it as their primary residence and made several updates (gas forced air, cat5 cabling, hardwoods, etc.)

- Requires property manager as I live ~1 hr away

- Multiple income possibilities, but could mean more turnover

I was offering in the $220k range, or a higher price but with closing costs paid by seller to help minimize cash out of pocket.  Appreciate any guidance/points of view!

Adam

[J Scott]

Everyone has their own criteria for deals and their own goals, but as far as my criteria/goals, this would be considered a HORRIBLE deal...