All Forum Posts by: Brent Paul

I was recently offered a 3 bedroom house for rent in a nearby college town. It's within walking distance to campus and in a great neighborhood. Also there are many elementary and middle schools within a mile of the house. The owners keep excellent records of everything and they have actually rented to more couples with children than college students.  They kept me in mind as we have talked many times over the last 4 years about rentals.  They have the rent set well below market rate.  

The owners are in their 70s and downsizing and wanting to get out of the rental game as they have been in it over 40 years. The house is owned outright with no leans they are aware of. The catch is the lady renting was a smoker. So we will probably have to get an ozone generator in there and repaint etc. Within the last 6 years they have done the roof, furnace, all windows, carpet, bathroom, and kitchen remodel. House was built in 1900 and the siding is brick.  I haven't personally walked inside yet as they are still trying to get this lady out.

They are offering it to me for 75k and based on comps in the area I think it's worth at least 100k. It was appraised at 95k a couple years ago.

Rents in the area range from 1200-1400 for the same sft and number of bedrooms depending on how recently it has been remodeled.  

I'm thinking worst case scenario if the lady destroyed the place I will have to put in at least 5k.  We did a drive by and the outside looks to be kept in great shape from what we can tell.

The owner might be open to owner financing.

Thoughts?  Suggestions?

If their credit is good and they pay their bills on time I have no problem with that.  Some people are just going to be lifetime renters.  I know several people like that.  Lots of debt and they like to buy nice things.  I would only be concerned with how steady their jobs are especially with everything going on right now.

Personally I would walk away.  

Those items could get pricey and sometimes with termite damage there are things you can't see til you tear into it.

They will either agree to fix, lower the price or tell you the price stands.

If you have't already contacted your tenants than you should do so.  We will work out some type of payment plan to pay back over several months if needed.  I do have money in reserves for worst case scenario.  No doubt this is not the ideal situation and there will be many people losing homes or evicted in the next year or two.

I think we are best to try and work with our tenants in these tough times.  Yes we have bills to pay too.  But would you rather get 0 dollars for rent from an angry tenant you can't evict right now or partial rent with an opportunity for them to pay a little extra each month after to catch up.  The choice is yours how you proceed.    

https://nypost.com/2020/03/21/hero-landlord-lowers-rent-to-100-amid-coronavirus-outbreak/

I would imagine not many of us would be able to do this financially, but it's a good gesture.

This is a business and should be treated as such.  No matter what you decide you should have a frank talk with these tenants and let them know rents will go up.  Being that far under rent is too much in lost profit.  But an increase could cause them to leave.  I'm guessing they stayed for so long because the rent is cheaper than elsewhere and they like the building.  If you gave every tenant a break in rent you would go broke.  Even if you raised it 100 dollars they likely won't find anything comparable in price.  Also once they move out you are probably going to need to spend some money on remodeling.

@Account Closed

Any chance you could rent out the house to help recoup some of the costs?  Or possibly do a lease option?  Neither is a fix all, but the property sitting empty is going to cost you extra money each month.

I wish you the best of luck and hope you find a resolution to this situation.

I think every flipper or investor has at least one story of a deal gone wrong.  If anything it gives you some lessons that you can learn from for the next one.  It never hurts to overestimate your repairs a minimum of 10 percent.

I lost over 20k in my first deal.  Over confident and assuming things would work out great without doing more research really bit me hard.  I didn't just lose the money I put into it, but also the house.   It looked easy and I read a ton of books.  Not so easy in real life.

Almost impossible to give him a price without first knowing what it needs for repairs.  

You can try and see if the owner will do the repairs.  If he just wants the property gone and sold he probably won't put any more money into it.  Some people are just done and want out.

Once you find out what it needs you can throw him a few offers.  One with him doing some repairs on it for X amount.  Two with him doing no repairs and you buying it for X amount.  It can't hurt to ask.  Worst he can say is no and then you just need to figure out repair costs.  Make sure your comps are strong and your repairs are strong quotes as well.  That should hopefully cover you.