Posted by Warner(ATL) on April 28, 2000 at 11:21:31:
This deal is a little tight from a total investment to value standpoint. You’ll be in at 35K total and the value is 42K. This is 83% of value, which isn’t bad, but leaves little room for mistakes and other expenses that tend to “show up out of nowhere”. However, the financing does help with the owner carrying back the second mortgage. The rule of thumb you’ll see around here is (FMV of property *.70)-repairs=maximum amount you should pay for a property. How are you going to pay the owner when the three years are up? I would only structure the deal this way if I was going to L/O it with a strong tenant (which you may have already considered) or sell it retail outright. Otherwise I would work on the price a little bit more.