First Potential Wholesale Deal

[Jeff Amore]

I had a meeting with a property owner yesterday on a small single family property that he's owned for about 20 years. My intention is to wholesale the property and I had a contractor there as well who will be providing the estimate. The home, although extremely small (576 sq feet) sits on a very nice .3 acre corner lot. Here's the challenge.... ARV on the property is $70k-$75k and initial rehab estimate is $20k-$25k. It's a 2/1, almost certainly a rental for an investor more so than a flip. Rent after rehab would be $800-$850/mo (previous tenant paid $750/mo). My thinking is to make an offer of $22k, but the owner took out a loan against the property last year for $35k. My questions... Should that loan impact my offer? Who is responsible for making sure the loan is paid off? Current seller? Buyer? Also, is there a way to leverage the property (the .3 acre lot) to make a better offer? The lot is big enough to put another modular or mobile home there (not unusual in this area) but can you put two residential buildings on one lot? Are there zoning considerations? That could make the whole thing more attractive to a potential investor and could impact my offer. Thoughts? Feedback? Advice? All welcomed!

[Christopher Brainard]

@Jeff Amore

No, the loan should not affect your offer. The house is only worth what the house is worth. The seller is responsible for clearing the loan before the property can be conveyed to the buyer. If he is short funds, he would have to make up the difference in cash at the closing table. Unless it is zoned for two houses, you can not just add a second house to the lot. At 22k, I think you're doing alright and can make yourself a couple thousand dollars. If you had to come up to 35k, I think you would have a difficult time wholesaling the property. 

-Christopher