Hi all, long time lurker here. Apologize in advance for the longwinded post : ) I bought my first primary residence in the Norris Square neighborhood in 2019 with the initial plan to turn it into a duplex because my side of the block is zoned RM-1, but due to lack of funds my partner and I decided to rehab it with a home equity loan and live in it and we've been here ever since. The neighborhood has seen a ton of growth, and I was able to cash out refi in 2021 to lock in a 2.99% rate and pull some cash out since we added value to the property. Since then I've been wanting to invest but keep getting cold feet. I've also been focusing more on my career to continue padding my savings for future investments.
Anyway to the point - my neighbor who has lived on this block for 50+ years wants to sell because his wife passed last year and it's a lot of house to take care of (18' wide, 1575 sq ft 3BR /2 bath, 2 story). One of his daughters is a realtor and hasn't listed it yet, but we've voiced our interest and looked at the house a few days ago. They had a lot of major things replaced in the last 2 years via a city program for senior citizens (roof, plumbing and sewer line, electrical panel but not a full rewire, windows, water heater) but the house needs a lot of cosmetic work and there's clearly water damage on the ceilings from previous roof leaks so likely some mold issues as well.
The daughter mentioned comps in the area selling for 220k-230k but I think that's pretty high given the condition and location (19133 vs 19122 which is closer to the park). There's one in 19122 similar size/condition listed for 189K, so I think around there or even lower makes sense. The tricky part is we get along great with them and don't want to offend them with a low offer. I just think they're seeing the house with rose colored glasses because it's been in their family for so long.
I'm estimating $120k-$160k in renovations for medium grade finishes and keep it a SFH, so I'm thinking I'd offer around 190k and with that mortgage it probably wouldn't cash flow as a rental, so we'd probably live there and rent ours out (potentially as a mid-term) since our mortgage is pretty low.
Another option is trying to work with a hard money lender, stay in our house, and either:
- Spend more on rehab to turn theirs into a duplex (2 br/1 bath each). The mortgage would probably be well over $3K/month so it still may not cash flow unless they were mid-term rentals
- Keep it a SFH, do lower-mid grade finishes so the rehab cost is lower and it cash flows at least some, betting on the neighborhood improving and interest rates eventually going down
Because I've yet to pull the trigger on my first investment property, I feel like I can't get out of analysis paralysis. Thanks in advance for any thoughts or advice!
