What would make this a deal?

[Hugh Hartwig]

Some friends of mine are planning to sell their house, but haven't done any repairs or listed it yet. The house is in pretty good shape. I mentioned to them that I may like to buy it as a rental and they are interested in talking. They bought it 7 years ago for $115,500, and I estimate they still owe about $100,000. It may sell for about $120,000 minus $6000 in estimated concessions, closing costs, and requested repairs. They would also need to pay 6% ($7200) realtor commission to sell it. So their net would only be about $106,800 if they listed. Market rent is about $900-$950 with $150/month in tax and insurance. The house is about 15 years old so roof and HVAC are probably original. It is a starter home community, and the area is fairly nice. I expect appreciation to be slow to moderate (3-5%/year) over the next few years. Since they are friends I would only buy if this benefited both of us.

What purchase price or terms would make this a deal in your eyes?

• Retail value $120,000
• Estimated $107000 Net to sellers if they listed
• Rental Rate - $900-$950
• Tax + Ins. - $120/month
• 15 y/old HVAC and Roof.
• Slow to moderate appreciation (3-5%/year)

Here are some purchase methods I would consider:

• Take over payments with some down payment.
• Lease option
• buy it with a seller carry back.