Numbers on Current Deal

I called the lady back who left me a message yesterday. For whatever reason (I'm guessing being out of practice), my dialog with her sounded like a complete 'noob'. After hanging up, I could've kicked myself if I could with what I said and how I said it. I just kept losing focus on what I would try to say next, and get caught-up in a lot of "uhmmm... let see... uhmmm..." - just totally out of character for me.

But to the real crux of the conversation ...

She said she had her property listed a few months back, but had to list it for a price that was higher than people were willing to pay (her words), because she had to include RE agent/broker fees. Sure enough, I looked back in my database of properties and it was last listed in mid-March for about $5k more than it's worth. I asked her why she was selling and if she needed to sell ASAP or did it matter. She said she is getting married soon, and needs to sell the place before the end of May, since she will be living out-of-state with her soon-to-be husband. I didn't feel like she was REAL motivated, but you never know. However, "end of May" is less than two weeks away, so she could be getting desperate

I had done some research beforehand and saw a DOT dated in 2003 for $112k. She says she bought the place for $113,990, which leads me to believe she only put down about 1.5% at closing for it. It has a 30yr term, but the interest rate is what has me interested in this: 5%!!! I also asked her if the insurance and property taxes were escrowed, which they were. The total monthly payment for everything was $965/month, which was definately attractive. The only worry I had was that the neighborhood is located in a place that has seen stagnant (and even declining) market growth the last few years. But the Austin/RR area as a whole hasn't appreciated much, so I'm not TOO worried.

Anyway, here are the numbers ...

Current Loan Balance: $108,000
Interest Rate: 5%
Fair Market Value: $113,000
Repairs: $0 (according to owner)
Monthly PITI: $965
Fair Market Rent: $950-$1,100

Based on the numbers, I would need to take this property Sub2 without question. I don't have the funds available to make a full cash offer, and getting a conventional loan would put me upside down. If she is willing to do a Sub2 purchase, I would estimate about $1,500-$2,000 for closing costs and repairs. Another $2,500-$3,000 for anticipated carrying costs, although, being the summer months, I may be able to rent it faster. A rental analysis shows the neighborhood is mostly inhabited by homeowners, but has a larger than normal rental market (which is good). Running the numbers in my rental spreadsheet, though, shows I'll be cashflowing negative slightly.

I also ran the numbers selling to a buyer with owner financing. The results were a lot better. After two years, I would profit a little over $20k with an annualized 110% ROI. I can definately live with that. :-)