Sounds like he’s not motivated and asking you to pay at or over market for the property. And you don’t know what kind of work or maintenance it needs inside. Get some comps before you offer him anything, and then make that offer contingent on a thorough inspection. Don’t jump just because it’s “owner financed” - that doesn’t mean there’s a deal here. After you figure out what the market value of the place is, figure out what your cash flow will be - sounds like about zero as it stands now, with your only profit being appreciation - also probably zero, just as the market turns down…
Search the archives here for posts on cap rates to help you figure out how to run the numbers. Good luck.
I have a flexible seller willing to sell me a property. He wants 50k. It is 3 br, 1 ba.
The property is currently leased through July at $500/mo. It could easily be taken to $650-700 with a little paint and a lawn mowin. That is going rate for surrounding houses.
The taxes are right at $1k.
Ins. is about $300
Tax value is $48,500.
He is an old man and wants out of it. It has been a rental property for him for many years. He owns it outright, there is no mortgage.
I looked at the property. It is in a prime rental location for FSU students. Right across the street, within spitting distance. He did not want me to bother the tenants, so I did not get a chance to go inside. He said we could arrange that if I was interested.
My buddy who turned me on to him said that he was originally asking $40k for it. He said that was a bit more than a year ago. When I asked him about that he said that taxes had gone up, along with inflation, etc…
The property is in pretty good shape. It could use a little paint and lawn mowing, but its not bad. I noticed window units so I know that it does not have central heat and air. He said the house was on city gas.
It had a good size back yard with fence.
How should I structure this offer? He is willing to carry the note.