duplex buy/hold for cash flow, reconsider post-inspection?

[Terry Hoefer]

We had our offer accepted on a upper/lower duplex in a mostly single family area, so no real comps to go by. The house itself is solid, nice woodwork, 3 bed, 1 bath each. Upper rents for $800. Was asking $155,900, took our offer of $150k right away. Assessed tax value $169k, Zestimate, always questionable, $181k. Owner staes that price reduction was for roof replacement. We had our inspection, one furnace 20+ yrs, other 30+ yrs, one water heater 20+ yrs, other one ok. Mostly galvanized pipes with some leaky spots. Both sewer stacks need replacing. Bedrooms each have only 1 outlet, using extension cords, should add at least one outlet per BR. exhaust from furnace leaking into basement. Lower needs new tub surround, kitchen cabinets painted or replaced. We are now wondering if we should come back asking for further reduction based on some of this, at least furnaces, water heater, or ??? Lower will rent for $900. The owner doesn't have money, which is probably why she wants to sell, knows these things need to be fixed and can't afford repairs. We didn't really want to put a lot of $$ into it to start out, aside from initial purchase. No financing this way.

Anybody have any thoughts on this deal?? We would normally flip single fam., but with market the way it is, decided maybe buy/hold cash flow would be good for now. But to much fixing has us reconsidering the idea on this one.

[Jeff Sechrest]

I read a post on here the other day from... sorry can't remember who posted it. But the question was "How do you estimate rehab costs before detailed inspections?" Or something similar to that. One of the responses simply said to estimate from $20 to $35 a square foot and use that number for preliminary estimates.

Keeping that in mind if there isn't enough room to add that number to the purchase price and still cash flow or sell value added then consider offering less but list the repairs that'll have to be done for "safety" reasons. Let her make the decision.