Another Possibly Deal

I posted this at the end of another thread but haven’t had any responses on whether this would be a good deal.

Looked at another house today and would appreciate your thoughts on if this would be a deal. Seller doesn’t want to be a landlord and wants to sell it.
You can check it out here…

I think I can buy it on contract for 40K with nothing down and payments of $200/month, 6% interest with a balloon payment after 3 years.

It is a HUD house and currently rents for $400/month–rent should be closer to $500/mo. It’s my understanding rent can be adjusted March 1st.

The house has new roof, windows, furnace, water heater, electric has been updated. Exterior could use a coat of paint.

I’m sure I could sell this on contract NOW for 55K @ 7% interest but I would hold it for a rental for now.

Please let me know if you think this is a good deal.


I couldn’t do it for that price with rent at 400-500 with our 10 yr am loans. 40k @ 6% is $444/ mo by itself. Based on that alone as a rental, it would eat money each month. Of course you could stretch it out longer but I don’t like doing that on cheap houses. The $200 / mo isn’t going to do much for the balance. It just buys you time to do something else with it without hurting yourself financially each month. I like that it has some big stuff already replaced and I would have no problem repainting the outside. It sounds like you may be able to play this as selling on a contract at that higher amount. If you could get a decent down payment to drop your loan balance, it may be worth doing for cash flow like that. I just don’t see it as a great rental candidate over several years with rent in that range. I’d rather be around $650-700 to put 40k out there for it. Others may have differing opinions but that’s just how we’ve done business so far.

Thanks Justin!

My thinking was keep it at the 2% rule for three years. I should be in a better position to make the down payment at that time, and then sell on contract for a down payment that will cover some of my down payment and also cash flow $150-200/month. The worst that could happen is that I’d have to give the property back but I would do everything I could to prevent that from happening.