Calculating what to offer for potential rental property - Helppls

[William Kwong]

Hi Everyone,

I have a lead that I've been doing working on and I have a beyond nice guy who I really bonded with who is a motivated seller potentially digging himself in a hole.

I've calculated ARV and it's been really difficult because a lot of the potential comps were foreclosed or short sales, etc. - I took a property that was similar and totally renovated that sold at 152K so I'm going off that.

(He told me there was a house across the street that sold for 175K that was similar to his however, I couldn't find that anywhere so not sure if it's true.)

He owes 140K on his mortgage and has put about 25K into renovations over the years, but I would say it still needs about 20K-30K repairs to be move-in ready. (Lower-Income Area)

SO, I'm trying to effectively calculate what I can offer for a cash buyer or a regular investor along with my assignment of contract fee included (let's hypothetically say 10K).

So help me out here --

Cash Buyer:

+ 38,400 = Potential Gross Income (Rent a Year)

- VARIABLE COST (Below)

- 8% Vacancy

- 5% Repair

- 7% Property Management

38,400 - 7,680 (20%)

= $30,720

- FIXED COST (Below)

- 7,000 = Tax 

- 1,200 = Sewage a year

- 2,000 = Insurance

30,720 - 10,200

= $20,520 Yearly Cash Flow

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So based on that, what can I offer if a cash buyer wants 10% ROI and hypothetically I want a 10K assignment fee. Also if the mortgage has 140K and the seller's asking 180K.

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Investor Using Loan:

Now that looks great, but if it's not a cash buyer, they're going to have to factor in the monthly mortgage out of the $20,520. -- With the seller's HIGH mortgage due to refinancing the house, he pays about 1700 a month or around 20K for the year which would cash flow only 520 a year. When an investor buys the property, I'm assuming he'd get a way better interest rate than the motivated seller did but not sure how to incorporate that. 

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 I hope this makes sense and any advice/calculations would be great.

Thanks guys!