Posted by SCook85 on October 26, 1998 at 22:17:56:
Lucky,
You never mentioned if the owner is going to finance the deal himself. I assume that he is if he is looking for $5k down. You say that you want to get your $5k back, but when you talk about your lowball offer and refinancing you seem to want a lot more than $5k back. You need to decide what you really want to do.
Do not get hooked on the property. You need to find a motivated seller which the one you are dealing with does not appear to be. Don’t get caught up trying to make a deal with someone who does not want to deal. Make an offer that works for you. If they don’t accept it, move on.
I’m concerned about a first time ever offer and would like some advice please. Here’s the deal: This is a duplex in an older area that brings in $800. per month. The asking price by a fellow that just fixed it up for a sale is $48K. This is the general asking price for the area. The place is in good shape with new roof, wiring, paint, and some plumbing. He needs 5K down (the problem). I can do it with a line of credit, but with debt service (10% for 20 years and the 5K loan, things look no better than $50 net per month and the property would be at market price.
I want to get my 5K back if I give it to him and the only way I can figure that would be to offer $40k with 5K down leaving a $35K balance which I could remortgage for the new appraisal of 48K giving me enough to pay seller off, my loan off, and put $7K or so in my pocket. Problem is, I think the offer is low. Bottom line is that I either want a good positive flow or my 5K back.
Please – I know I’m missing something here – the seller is a hard investor and thinks his offer is good (of course he’s greatly underestimated costs and doesn’t know I’d have to borrow the 5K.
Posted by Joe Kaiser on October 27, 1998 at 04:20:35:
If he’s motivated and this really is the property to buy, tell him you’ll pay him the $5k as “prepaid interest.” That way, he get’s the $5k down payment he needs and since you won’t have to make payments for a year, you’ll get it all right back.
He gets a note for $48k, plus $5k down at closing. Doesn’t sound half bad.
I presume you are talking about initial seller financing, then re-financing with a bank? In my area, the bank will only loan 70% of the appraised value for investment properties, so you might want to check with your bank on the loan value.
In lieu of money down; if the seller doesn’t really NEED the cash, perhaps he would accept a higher selling price or a higher interest rate with no money down. This could work to your advantage to avoid the money down issue.