What would you do in this situation ?

[Chris Seveney]

I am looking at an off market deal which is a duplex. The owner needs to sell because they are in a financial crunch. In the short term she was also considering leasing it because of her desperation for Money. The home was listed on the market but was overpriced and needed work (listed at 100k and worth 75k) While preparing to make an offer with my agent, my agent just was advised the owner (went around her leasing agent back) and is in the process of leasing the home to a friend for $550 a month for both units (person moved in but has not finalized lease). The going rent for the home is $800 for the 3BR unit and $400 for the 1BR unit. The owner now notes she will sell the home but with the current lease in place (lease has yet to be executed). Based on the current revenue, what would you do - walk away - base offer based on current rent - or base on actual value ? My fear is with tenant in there and house needing work they will be a pain and constantly want things fixed and attempt to get reduced rent and then have to deal with trying to get them out in a year Thoughts ? Thanks

[Christopher Brainard]

@Chris Seveney

I assume that lease is going to be executed a few minutes before you sign your offer and it is accepted. You should make an offer as you normally would, but calculate the lost rent due to the preferential lease the owner's friend is getting. For example, if you need to be in this property at $60k, and there is a one year lease in place that is $650 below market rent, I would offer them $52.2k. No reason you should be paying for the owner's poor choices. You could also provide two offers, one with the lease in place and one without - perhaps the owner will see the cost of their error then.

-Christopher