Strategically help me buy this house!

[soccerluvof4]

So I have an opportunity through family friends etc... get a home well undervalue but I dont want to buy it unless i can take alot of the stress out of the purchase because I would want to sell my house. So I am just interested into the formalities, math etc.. of what or how someone would make this advantageous but realistic.  If he walks a way or gives me the F-bomb so be it.

Bottom line I am willing to pay up to 550k for the house max. So lets use that number. The house I live in now Should sell quickly as its in a HCOL area but in the price range where houses are selling in a week. And I should walk away on low end 275k after all fees.

I can do all sorts of things but this was what I came up with stupid or smart as it might be so willing to hear as much advice as possible.

The one thing is I am having 2 knees replaces and perhaps a hip which is why I am trying to cover as much time as i can in case incident or? Also want to be in a position to allow in case during this time market crashes to not use up all my cash.

So my thought was this.

The house would rent for 4k a month so put 2 years down or 96k 100% credited towards purchase price.

Put into writing to have up to 2 years to close on house max or 60 days from when my current house sells whichever comes first.

So using round numbers that would be 550k minus say 375k Leaving a balance of of 175k.  By doing this if for whatever reason it took that long and or I wanted to do things to the house before I moved in I would still have up to 4 years of living expenses covered without touching my investments.

So i was thinking I could in addition during the two years pay 2k a month which would be another 48k if I went the distance.

So this kinda gives you an idea.

I am wondering obviously ways to do it to tax advantage to me or so it doesnt cost me more money etc...

I will check back every couple hours to see replies as I would need to get going on this.

The Owner is an engineer and has documentation of every dime he has ever put into it and also its in very good shape. All that would be left to do would be a kitchen remodel and paint and carpet in certain rooms if we chose. Nothing would need to be done if one didnt want to but if we stuck 50 in it the return back would be at least double.

Thanks

[mozar]

First of all I would post this in the real estate forum or bigger pockets. All the ballpark numbers make me nervous. I also don't understand why someone would sell a house undervalue. It's not that hard to sell a house at market. And also being worried about using all your cash makes me nervous.

[former player]

I'm not clear whether this is a proposal to upgrade your living circumstances into a much more expensive house or a proposal to buy a house to rent/flip?  Or something in between: move in for a while, add value, and then sell and move on somewhere else?  It changes the considerations a bit depending on which you are looking at.

Apart from that, I would have thought that someone's main reason to sell at an undervalue is to get a quick and troublefree transaction.  Your proposals to lock the seller into a potential delay of up to 2 years would seem to negate those reasons for them to sell to you.


Looking at the money side of things -

1.  Have you contacted an estate agent about selling your own home?  If this opportunity to buy really is such a bargain, then you can probably sell your own place at a slight discount in return for a buyer ready to proceed quickly: that should take away a lot of the strain of a simultaneous sell and buy.

2.  You are going to have to borrow: either about 175k if you sell your current house and 455k if you don't.   Do you have a financing offer in place, and what's the interest rate?

3.  A house with a kitchen and decor that need updating will be harder to rent out and will pull in less rent.  If you are going the rental route you should probably factor in the time and cost of a quick cosmetic overhaul.  A rental income of 4k a month should cover your borrowing costs even at the higher amount if you can get a decent interest rate - which makes me think that you shouldn't need to faff around with a delay in the purchase terms, just buy the place outright.

4.  You say you've a couple of big surgeries coming up.  That means that you won't be doing much if any of the work on the house yourself but will need to hire it out.  That probably adds cost to the renovations: the house may still be a bargain but a bit less of one to you than to someone who can do the work themselves.    But if you are FIREd it doesn't otherwise change the financial calculations: as long as the house at least covers its costs as a rental you and your family can weather any delay caused by illness/disability etc. until you can sell on and make the capital gain.