Is this a good deal?

[youngone]

Hello All,
    I was contacted by a lady selling her home for 170k, what she said it appraised for. It is a 3bed 1 bth and a garage. In a nice area. IT needs minor repairs and a lot of elbow grease. I checked out comps in the area for homes that have sold within a 3 year span. Her house is about average with some homes selling for less. This house was previously rented and the owner owes almost nothing on it. I offered 150k and to take over payments and note her the diference on a 5yr term @ 5.5%. She said she wanted 20k down to pay off mortgage and would carry her own note at 4.75% for 5 years. I am going to have a drive by appraissal this saturday and get a more concrete idea of what the house is worth a full value. If it is 170k, I plan to find an investor to invest 25k @ 12% paying interest only due in full in between 6 mths and a year. I also plan to get the price down to 140k or 135k once I have the cash in hand and take the balance for 4.75%.  I figured everything would come out to about $875 and I can find someone Rent to Own or worst case rent it for 1200- 1300/month which is moderate for the area, considering I rent a 3 bedroom apt out for 940/mth. Is this a good deal or are there other things I should do that can make it better.
Thank you, Youngone

[IWINUWIN]

If ya buy it right (in this case 135K for a 170K property), here its about 80% of FMV, and get terms for 5 years it could be great or just ok. Depends what happens in the future. If houseing prices decline, ya have a good safety net, if houses appreciate-ya done real good. Either way, I think it would be a prudent buy based just on the aquisition of 80% FMV concept in a sellers market. I am not familiar with the area, the local market, and many other items that effect R.E. profits. I try and buy this way for the safety net in case I have to hold and drop rents. Again it all depends-but looks ok from the outside.

KEC

[youngone]

Thanks for the response. I checked for other homes for sale in the area and only found 2 within a 10 block radius. One went into contract for 160k and the other is on the market for 160k. I will most likely act on this deal I just need to find an HML.

Thanks, Youngone

[Bud Branstetter]

Rather than a hard money lender you should investigate selling a note to get her the cash. Either way she would have  to subordinate her note to the first. She is not likely to do that sice she already said she wants the cash to pay off the first.

A note buyer will do 70% on a NOO loan so try to get her to take a small second.  

Unless the investor is a relative it is unlikely they will do a loan in second position or for as low as 12%.

Another option is if you can do the repairs, holding costs and sales cost down to make 15K  fix up and sell retail. If you can get her to take 135K then I doubt there is enough spread.

[youngone]

Thanks for the advice. Although I was going to go with an investor, me being a newbie and the fear of working with an investor, I structured a lease option. I got them to drop the price to 140k. I will give 5k as option consideration and structured a term from 6mths to 1 1/2 yrs to cash them out of the deal. Since this was a rental home I figured it wouldn't hurt them to structure it this way, they were landlords for 8 yrs. I also suggested to them a wrap on the old balance and the new balance with me at an agreed upon interest rate. So that they recieve cashflow monthly and I get the property and receive cashflow monthly. Also I already found some one that would like to rent to own. Does this seem like a good alternate option?