First Deal...Hoping for some advice and/or new ideas
- After months on BP and talking about real estate with people (still working on this), I found a "seller-financed" property. It is a 2/1 from an extended family member. She claims she is motivated to sell because she "doesn't want to deal with it anymore." She has said she won't sell it until I decide whether or not I want to buy it or pass on it within a reasonable time frame. So here are the specs and my thoughts:
Specs:
- 2/1 SFH in a nice neighborhood. Comps for the property according to one realtor and Trulia to be upwards at $500,000-$600,000. Local market is moving well, now.
- Owner reports owning property "free and clear"
- Owner had mentioned in passing a price of ~$400,000 but hasn't done any research on it. Owner wants to sell "as-is" and understands that a lower property price will be accepted because of the need for repairs.
- Owner reports that the property will need a new roof and has a bathroom leak (has been present for a few years and extent of damage is unknown)
- Currently being rented for $1,000 a month and hasn't been changed in ~20 years. Rentometer suggests that the rent for this property in this area should be $1,300-$1,900.
- Open to seller-financing.
- I believe owner wants money from sale to help with a rehab of a duplex she owns.
My limitations:
- Very little cash on hand and likely not enough for a down payment, let alone renovation costs.
- I may be able to find some people to borrow money from for the deal.
- Due to it being a smaller SFH and in an expensive market, cash flow will be hard to obtain.
- Exact costs of repair and rehab are still unknown.
- Would a bank lend on an ARV to help finance the rehab without owner occupation (203k)?
My goals:
- I'd like to start my real estate investing career.
- I'm more of the mindset to acquire for cash flow and force appreciation. Appreciation is icing.
- Would like to do more apartment investing for long term buy and hold strategy or buy rehab, refi, repeat.
- This may be a foot in the door to get started.
- Try and construct this deal with little or no money down on my part.
Ideas to present to the owner:
- Pass on the opportunity
- Buy with intention to flip this property. If I can obtain it for a good price, flipping becomes a viable option, but still need the money for rehab. [Need money for acquisition and flip. And I would prefer cash flow.] Even with a flip, will likely gain some equity and profit.
- Traditional money down and seller-finance the rest. [Appreciation play since cash flow will be VERY difficult to obtain, but possible]
- Master Lease where I take control. Rent it out at a market rate. Collect cash flow difference and save it for the rehab costs of project. [will probably take too much time to generate enough cash flow for rehab]
- Master Lease where owner does a refi, pays for renovations with that money, I manage the asset and the project. If constructed for cash flow. I keep difference between fixed payment on master lease and subleasing for more (due to low current rent). [Seems like a viable option, but owner would still have to deal with the property a bit (new mortgage)]
- Lease-Options/Live and Flip. I can save a little money on rehab by doing some of the basics myself. Would still need to contract for the roof and whatever plumbing issue there is. [would be paying rent myself rather than getting cash flow].
I'm leaning towards one of the master lease if the owner is on board. It may be the only way to gain cash flow. Is there any ideas I may be missing to try and generate a monthly cash flow? Or is that a stretch and most of the money would be in a flip situation.
Thanks for your time and I appreciate any input/advice/criticism.