Wholesale rental property in good condition... what to offer?

[Michael Lerch]

I'm new to wholesaling homes, especially rental properties. I'm trying to make a fair offer, but my experience so far is that landlords/investors see the value of the home and think it's worth more because they have a paying tenant. It makes it all the harder to negotiate a wholesale price. (thoughts?)

Details:
•3/1 ranch
•1,554 Sqft
•2 stall garage
•Roof is in great shape.
•10x15 office area (not considered one of the 3 bedrooms)
•no washer and dryer hook ups. Tenant uses laundry mat.
•no basement
•no dishwasher
•smells like tenant smokes (is that a deal breaker or doesn't matter?)
•no major repairs. There's a small crack that runs down the middle of the ceiling, but it doesn't look like any water damage. Might be from house settling, but that's the only thing that really stuck out.

Home is in a nicer grand rapids MI neighborhood near main drag of retail and businesses, not ghetto at all.
Seller tried selling in winter of 2010 at $75,000 but did not sell after 4 months.

Home is a section 8 rental that brings in $816 a month with a tenant that is happy there. Taxes are up to date and currently $2,600 (over-assessed?) a year. Seller is motivated for health reasons.

Recent Comps for this home are ranging between 70k-80k so for the sake of being conservative let's say 70k.

Because I'm looking to wholesale/flip it to another landlord I would need get it around 40k-50k. Is that a fair offer for a rental property like this more or less?

Tried to be as detailed as possible to lay everything out on the table.

Thanks for your help!

[Nathan Emmert]

Michael, there are a few big concerns with that property.

#1 is the taxes. Those taxes equate to 25% of GOI at Section 8 rates which are often over market.

#2 is the seller will base his sales price off the Section 8 rent he's getting. A savvy investor would likely go by market rates which are often lower.

#3 is price. I'm a little easier than some investors, but I still target 1.5% of purchase price in rent. I'd be looking around $50k maximum.