A lady approached me witha house she is selling. Here are the details:
3 bdr, 1 bath
Asking Price: $115,995
Appraisal: $118,000
No repairs needed
Mortgage Balance: $103,000
Mortgage Payments: $780
Is there anything I can do with this?
What do you want to do with this house live in it, sell it, or rent it?
I would like to sell, or lease option it out, if possible.
What is the market rent rate for a 3/1 in your area?
Keith
She’s not giving you any free equity, therefore you don’t have a clear way to make any money. I’d pass. In this down market there’s absolutely no reason to pay retail price for an investment property.
I would straight up tell her, “I’m an investor as you know, and I have to have some room to make a profit or else I have no reason to get involved. If things change give me a shout.”
For me to have any interest in this deal she’d need to sell it to me sub-to or owner financed for what she owes on it (plus maybe a bit of moving money).
If the house sells at retail $118,000 and she gives you the house for what she owes $103,000 there is only $15k gross available funds in this deal. I don’t think that any deal no matter how smoothly it goes can be done for less than $10k in costs. That is when you consider acquisition costs, holding costs any fix-up costs and selling costs. Think about it even if you sell it in a week without doing anything but listing it, the realtor’s commission is 6% or $8k. What I see is that you will have to pay for the experience to touch this house. There is just no money there. I would pass.
Who appraised it and when?
Unless that appraisal was done this week by a bank that had agreed in writing to give a mortgage on the house for that price, the appraisal might very well be way too high.
There is no such thing as “no repairs needed”. Even brand new houses often need something fixed.
So unless the house was just renovated by a very good renovator, and no one has lived in it since it was finished, you are going to find something that needs to be fixed or replaced.
In this market, nobody is buying (at retail) any house that isn’t sparkling ready to move into. Why should they buy a house that needs to be cleaned or repainted when they can go down the street and buy a house that is move-in ready, probably for less?
What about doing a sublease?
I think contact with a good Realtor.