I'm looking at a potential opportunity. SFH, ranch, currently has tenants. I looked up the owners, they live in SoCal a few thousand miles away. In this market the rent:price is usually around 0.5%, pretty terrible. The rent:sqft is generally 1.0-1.3.
List price seems on the low end of what I comp the property at. I did a brief showing yesterday. Needs some light exterior work (paint, caulk, broken vinyl siding). Inside is clean and obviously tenants are very neat. It was a short notice showing and the place was immaculate even though they obviously had two little kids.
List price: 315,000
Comp: 310,000-340,000
Current rent: 1,800 (expires April)
Comp rent: 2,000-2,300
Rehab: $1000+turnover costs? Most of the exterior is fine. Brick front, vinyl siding. All the trim needs to be repainted and recaulked everywhere. Assuming inspection doesn't turn up anything unexpected.
I told my agent I thought $280,000 is a no-brainer and $300,000 I probably can't pull the trigger. Asked him if they'd entertain an offer around $285,000 cash or if it was a waste of time. He got back to me later and said they'd consider it as long as it is a "clean" offer.
We're going to do another showing tomorrow. I'll be looking deeper for any issues and I'm going to get up in the attic as well.
I can understand why they're having trouble selling the place. Anyone looking at it for primary residence isn't going to pull the trigger with tenants until April. And it's just not a great investment at list price (though why wouldn't other investors be happy to lowball? clearly they're out there in this market following the 0.5% rule!)
I don't understand why the sellers are so motivated, which is what my agent told me. They've had the property since it was built in 2006. Even if they refinanced it still has to be cash flow positive (assuming they refinanced during ZIRP). I get the rent is substandard but it seems if they just hold on for another 7 months they have a vacant property they can sell to all the regular primary home buyers in the market and get a much better selling price. The only thing my agent was told is this is the last of 4 properties they are 1031ing and they're motivated to get it done.
Am I missing anything? This would be my first investment property and I don't want to **** it up.
