Is there a way to make this a good deal?

Question

I'm a newbie, and I'm trying to find a way to make every strong lead work. However I don't see it in this instance. I'm going to walk away from the below, but before I do let's ask all of you investors what you think...

Background:

Driving for dollars letter called me (wow!). I've talked to them a number of times, and walked through the house. Nice family, but they are house-poor, want to move for a shorter commute and lower housing expense. Lots of deferred maintenance, which they know makes it harder to sell. At this point they'd consider taking enough to pay off their note, maybe a little extra to move with.

The Numbers:

Lead owes about $106K

ARV is a conservative $150-155. Probably could break 162K, but let's assume conservatively.

Conservative rent estimate: $1100, but $1200-$1250 is possible.

Taxes: $3600 a year (ouch).

House could easily use 30K in work. Nothing too major, but just lots of deferred maintenance and lack of upkeep, and some crazy stuff too (the only house around that has a gravel driveway, backdoor is elevated for a deck, but no deck there)

I could buy cash for the purchase, rehab, etc, but there's no way I get a good return there.

Assuming 8% Maint, 6% capex, 8% vacancy, 8% prop management for rental scenarios.

Is there something I'm missing, some"creative" method I haven't considered of making a reasonable flip return, or making a decent CoC/monthly cashflow? "Subject To" is possible, but then how do they get financed for the next place? I don't think subject-to actually solves their problem.

Like I said, motivated sellers, but I don't think it's a deal.

Gary Headrick · Answer

When you start "trying too hard" to make a deal work it is time to quit. There is always another deal much like there is always another sale. When in doubt - don't.

Account Closed · Answer

You can't cure all ills. They got themselves into this situation.

Their actions dictate their options.

If they don't get enough, they have learned a valuable lesson and will either change and benefit going forward or not. This is a Business not a charity. Give 10% of your profit to charity, (God is honored by that) but don't reinforce bad behavior.

Chris Gordon · Answer

thanks guys, I needed that sanity check

Account Closed · Answer

@Chris Gordon Buy it "Subject To". Do NOT put much money into it ($3,000 maybe) and sell it as a "Minor Fixer" on a land contract.

If you can't find a way, assign it to me.

Chris Gordon · Answer

Account Closed unfortunately how do the owners get financed for their next home? I agree that your recommendation would absolutely work (although I see I need to educate myself about land contracts), but unless they rented while I did my piece they'd be unable to get financing.

Brent Coombs · Answer

@Chris Gordon looks like you're not only "trying to find a way to make every strong lead work", but you're "trying to find a way to make EVERY lead work" (whether strong or not)!

There are likely plenty of owner-occupiers out there who might like to take this one on despite its condition, BUT, unless your Buyers-List ALREADY includes such folk, the Owners should probably just bite the bullet and have it listed for what the market will bear.

For future reference, as a "Rule of thumb", Investors won't likely interested in properties that would generate less than 1%/m gross rent for their all-in cost (ie. Meaning: why would you be?) Cheers...

Anthony Wienke · Answer

Iv always used the rule of never falling in love with a property. Keep looking and something will pop up thats a better deal.

Is there a way to make this a good deal?

Most Popular Reply