As I said earlier, I have several rental homes that I bought in order to manufacture some capital gain. Now that kids are going to school now and the heavy tuition burden calls for my selling some or all of the rental homes.
There are four of them. Tonight I address one of them.
This is a house I bought off a tax auction for $31,000 in 2007. It is a little two bedroom single family house that was built in the 1950s. The bidding got a little bit of hand and I was determined to have one tax lien house just to see what is like to invest in this category.
There was no time to inspect the house in details. After winning the title to the house, I spent over $15,000 on material and labor to restore the house to a livable condition, not counting my own sweat equity.
So I own the house 100%. There is no bank that has any claim to the house.
And I have been collecting first $650 than $700 per month in rent from the house. The return on the house is about 15% on the money I invested in the house.
But the family lives there has had some difficulty lately and their rent payment is not consistent; it is 20+ miles from my home so I really do not have the time to keep and good eye on the house; and most importantly, I need the money.
I called the realtor from who I bought a rental home and who also sold one my properties before. He thinks the house worth about $62,000.
I don’t think it worth that much, but might as well give it a try.
But I decide to give my current tenants the first right for refusal. It is a courteous thing for me to do as I am selling properties that are occupied by tenants, I need every bit of cooperation from my tenants in order to sell the house.
In order to sell the property, I did the following rough math for my tenant to show him how much money he would save if he buy the house:
So he could save $267 per month if he buys instead of rents. The decision seems a no-brainer. But why he does not jump on the suggestion?
Now, two things stand between him and owning the house: 1. down payment, 2. getting a loan from the bank.
Do you think my tenant can pay 10% for the house as down payment? and how likely he is going to be approved for a loan?
I will update on the story in the next couple of days.