Long time lurker but I came across a property when I was looking for my first deal and wanted to see if more experienced investors could give me their opinion and insight.
The owner is out of state and it is listed for sale. The sale price started at $179,500 and then dropped to $174,500 and now to $169,500.
The current owner bought this in 2022 as a market flip. They purchased for $185,625 with 20% down and 6.99% interest rate. If they have been paying the mortgage they have about $144,300 left on the balance.
I was thinking of offering $120,000-$125,000, what do you think?
I am estimating a NOI of $14,000 with rent prices for a 2bed/1bath in the area around $1000 a month for both units.
Hey there! Looking at your post, this seller is definitely underwater. They bought at $185K, now asking $169K after multiple drops, with $144K left on their loan. Ouch!
Your $120-125K offer is bold but honestly makes sense given they’re already taking a loss. Just make sure your $14K NOI is realistic - a lot of new investors forget to include all expenses.
For a $125K purchase with $14K NOI, that’s an 11.2% cap rate which is pretty sweet! I’d go in at $125K and see what happens. They might surprise you since they’re probably just trying to stop the bleeding at this point.
Thank Sean and Ted for the reply, thoughts, and encouragement. I redid the analysis and estimated a lower NOI and then put in an offer at $115k. The seller originally bought the property in 2022 and hasn’t paid the property taxes since 2023. Even in the disclosure they said they never been to the property. So I am thinking they never found someone to rent because their rental cost was too high for the market due to the age of the property and its location.
My offer was rejected but the seller did say they have an outstanding loan for $155k on the property. I will tell my agent to let them know I will pay for closing costs and waive the inspection contingency if in the future they change their mind and have to do a short sale.
What other offers or proposals may work to relieve the obvious pain to the Seller? Sub-To? Deed in leu? Seems like an opportunity for someone somehow, even if you end up seeing it come up as a foreclosure.
Want to share the address so others can get more up to speed on the details?
