Posted by Dee-Texas on January 25, 2001 at 11:32:17:
Thank you my friend, I know that I can always count on you for helping me see through the trees.
Dee-Texas
having problems with terms - Posted by Dee-Texas
Posted by Dee-Texas on January 25, 2001 at 07:33:25:
Hello all,
I have many of the courses and am rereading them. I am lacking in offering terms if I can’t buy below FMV.
Here’s the deal:
Older home 3/1 remodeled, gas heat, new carpet and some new paint. No air conditioning would have to put window units. This has an apartment 1/1 behind it that stays rented for undermarket rent. Owner lives 300 miles away and tried to sell with realtor, the house didn’t move, now trying to sell FSBO with owner financing. wants $39,500.00 FMV $39,500.00 maybe a little more. Around here you would have to L/O the whole thing, making the payments around $550.00 which in this area would not bring this type of money, but it would be great rental property. Still I think that this property has great potential.
Anyone give me ideas how to go about offering to buy so that I can come out of this ok?
Can’t see the forest for the trees.
Thank you
Dee-Texas
Re: having problems with terms - Posted by phil fernandez
Posted by phil fernandez on January 25, 2001 at 08:05:30:
Hi Dee,
Everything in this business is price and terms. Your seller wants his price, he’ll need to give you your terms. Now if the property is worth the $39,500, then at what terms would produce a nice positive cash flow for you.
In Robert Allen’s “Nothing Down” there was a chart. The top was all cash and the bottom was 100% owner financing with an unsecured loan. Then there were about 8 other variations between the two mentioned extremes depending on the motivation of the seller. If you can get your hands on the book it would become clearer. I think Allen called it “The Heirarchy sp. of Paper.”
I would start at the bottom and work up with an initial offer of $39,500 0% interest all payments applied to the reduction of principal, with a substitution of collateral and subordination clauses inserted in the mortgage.
If that’s a no go, work up the list to maybe a token $2,000 down and a note of $37,500 0% interest, 20 year term.
If that doesn’t work maybe your next step would be $2,000 down and a note of $37,500 at 5.5% interest, 20 yr term balloon in 10 yrs.
I think you get the picture here. If he wants his price, you’ll need your terms. And start negotiating from the bottom and work your way up to where the seller will accept or it gets to the point where the deal doesn’t make sense.
Above all negotiate your terms to ensure a healthy positive cash flow for yourself.
Good luck.