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I met with two ladies today who have a vacant 3/2 double-wide on a full basement. Part of the basement is finished. House is in good condition, 11 years old, 2 year old heat pump. Have had it listed with a Realtor for a year. Their listing has expired and they called me from a letter I sent to them a couple of months ago. They are asking $110,000. They owe about $95,000 with PITI of $750 per month. The house should rent for $850 or more. I offered to make their payments until the loan was paid down to 75% of value to be determined in a few years by appraisal. They seem very interested in that. I think I can wrap their note and get a down payment and make about $100 per month. We are supposed to meet again later in the week. Any thoughts or advice would be welcome.
What’s it really worth? Probably closer to $95,000
I would pass on buying this one. Don is right, a master lease makes more sense HOWEVER I would not agree to make any payments unless and until I found a tenant who would pay at least $850
The big advantage of the master lease is you don’t have to make repairs.
If you buy this property ( with only $100 per month in cash flow) you could easily lose a full year or two of cash flow if the basement leaks, the heater goes out or — if you get the wrong person in the house and they tear it up.
The deal is way too skinny to buy. there is no equity and too little cash flow.
A master lease would be much better.
Let us know what you do.
With every deal you do, think about what are the risks and how can you avoid them. The risks with this one are that the tenant/buyer could move out and you get stuck with payments ( if you buy)… to reduce that risk, do a performance lease where you only pay the owner when/if you collect rent from a tenant.
Another risk, is house repair costs if you buy, but if you don’t buy, those costs are not your responsibility.
Finally, you have to decide if $100 a month cash flow is enough to make this deal worth your time. It would only be if you could attract a GREAT tenant who pays on time and takes care of the property.
Jackie, I agree that just $100 a month is not much. I am now considering trying to get a lease/purchase contract on this property and then trying to find someone who I think would be a good tenant, and be able to buy the house in time who I can assign the deal to for $2K to $4K. What do you think of that idea?
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