What Would Make This Worth It?

Hey, I am new so go easy on me :)… My wife has a friend who moved to another area and is having problems selling their house… They owe about 155K and it is worth maybe that or a little more… There is a party that is interested in renting (Section Eight) for a total of $1300/month. )

Here’s the question… After reading that scenario do any of you see a deal here. They want out of the house, so I am wondering what would the numbers have to be for us to offer to them to make the deal worth even pursuing.

We would like to pick up rental but the deal would have to work in our favor to produce a cash flow.

What do you all think?

My first question would be does the area demand $1300/mo in rent? If not and the people that are “interested” bail on you then you’re sol. So your calculation as to whether or not a deal may be positive needs to be based on the real rents the area demands. I think $1300 in rent for a $155k house sounds like a lot…that’s just my impression without having any of the details.

Also, find out if Sec 8 will pay that much for rent in your area for that many bedrooms, etc.

My wife has a friend
First I never do business with anybody I can’t sue. If the deal goes sour and you have to sue your wife’s friend, will it make Christmas, family reunions, work, your next party, etc difficult. If it will, I won’t do business with them. I would advise them, I would give them $155k, but I would not do a deal with them.

Next I always approach deals with the end in mind. For rentals I look at what the area is renting for. I determine the maximum amount of money I can put into the house and make it cash flow. That would include PITI, fix up and expenses. I work backwards from there including how much I have to put down and how much fix up I can afford. That will determine how much I can offer for the house. If it will cash flow, I make that offer. That number is independent of what the seller wants to get for the house. I have my number and if I offer more than that, it is just charity to the buyer and does not help me in my quest.

With the numbers that you gave, the maximum that I would even consider paying would be $65,000.


With the numbers that you gave, the maximum that I would even consider paying would be $65,000.

Mike, are you responding to the right post??? Given the information here, you imply that a house worth $155k that may or may not be able to rent for $1300/mo would only work if acquired for $65,000??? How did you come up with that number? Do you have success with that strategy (i.e., 40% of market value for rental houses)??

I’m really curious.

Yes, I responded to the right post. The market value of the property is irrelevant for a rental property. All that matters is that the positive cash flow is sufficient to keep you in business for the long term. In my experience, that means getting gross rent of about 2% per month of the cost of the property (including rehab). Therefore, in this case I came up with a maximum purchase price of $65,000 for this property. Obviously, if I could buy a $155K property for $90K, I do it and then simply sell it!


hjstewart you have not provided any details of the facts.Mortgage payment?management fees?etc :banghead: :hammerhead:Who said anything about rehabbing?who said it was a fixer upper?“Obviously, if I could buy a $155K property for $90K, I do it and then simply sell it”…And this answers the origional question how?