Need second opinion on deal ananlysis

[Xingcai Wu]

Hi BP,

My name is Wu. New to BP and signed up for Pro membership couple months ago when I decide to buy my first property to house hack.

I have gotten a four unit property built in 1902 under contract. It is two-duplexes on the same lot with a four-car garage. My plan is to house hack in one of the duplexes and rent out the rest. The asking price is $349,000 with property tax around $5400/yr. Property insurance about $250/month. I’m going with 20% down conventional with rate locked at 6.625%. 

 Currently one duplex is rented to section 8 tenants. The rents on the first duplex is $1200 and $1300, could be higher when leases end. The second duplex is currently vacant, the rents could be $1200/unit when fixed up. Based on what I saw on my walk through, the vacant duplex needs a lot of work, such as new roof, windows and siding. I negotiated price down to $319,000. 

So, after the inspection last weekend, we  found there are more water damages to both duplexes because of missing gutters and holes on roof; also, foundation problems and old knob and tube wiring. And garage roof needs replaced as well.

I will definitely go back on the negotiation table and try to get seller credit. My question is should I walk away
from this deal because it has too much problems and too much money to fix it up? 

Any opinion helps! Thank you so much!

Wu

[Philip Murphy]

Quote from @Bob Stevens:

Quote from @Philip Murphy:

Do you have a contractor you trust? At this point I would walk the property with my contractor and get an idea of how much you are looking at in repairs. Sometimes it is hard to tell how much work/ money is needed to fix a foundation, so if you do renegotiate you want some wiggle room in your repair estimates. 

Whether you walk or renegotiate depends on your willingness to undertake a big project, and if your numbers still work when construction goes over budget and takes longer than you estimated.

 Its a terrible deal , he will be in north of 360k, roof, 8k, at least, windows, assuming 20, 6k, siding 15k, all cosmetic 5k, gross rent about 28k, net about 20k, if that, I would pay 200k MAX, and that still is not great, 

All the best 

I’m not trying to talk anyone into a bad deal, and maybe I misunderstood the numbers. Bob, I’ll certainly defer to your experience here!

I read this as rents of $1200-1300/ unit after fixed up, renting out 3 units and living in one. That’s 43k gross income. And it’s a house hack.

I think the price would need to be negotiated down significantly…completely agree. This would be a bigger and more costly project than I would personally undertake. I also don’t know where Wu is located. Since he wants to house hack I’m guessing he is looking for the best purchase in the market that he lives and works in.