How can I make this work(Creativity needed)? Long! - Posted by Brian-Northern NJ

Posted by Glen SoCal on February 18, 2002 at 12:14:21:

Brian- NoNJ

I think that you should look at your opportunity this way, you might ask yourself these questions:

1)After the purchase, am I immediately in line for a 15-20% profit if I decide to sell?

2)Or, am I making enough immediate cash flow for taking my valuable time out to rent a four-unit?

Your approach should include the costs to purchase and sell and the AMOUNT of that spread for a profit, or, costs to purchase and maintain the property for a reasonable AMOUNT of cash flow. That’s all.

Price is irrelevant. The AMOUNT of money spread between your costs and profit or cash-flow are.

Let the price you are willing to pay become an empirical decision. Then start lower and work for your best deal.

If you don’t know how the numbers SHOULD work, you may want to read up a little on buying and profiting from rental property.

There are a hundred ways to finance property. But the solution to the problem how the property will be financed, while making a profit, will depend upon the needs of the parties involved. In this case, you and the seller.

One poster said that the seller isn’t motivated. Maybe not, maybe so. HE may however, be motivated by needs different than YOURS. If he wants to cash out, he may be VERY motivated to cash out right now…at $260,000. He may not however be very motivated to sell you his place on seller-financing terms.

So the answer is, vague. You must fill a need. Find out what concerns the seller, find out what his needs are, and see if you can create a solution that benefits you both…profits for you both.

I’m not an experienced investor. So I’m not the best one to give you solutions or methods to try. But your method or solution WILL depend upon what the seller needs, or, WHAT it is that will motivate him that agrees with your terms.

It’s kind of like, follow the scent, or follow the money. Follow the motivation, and fill the need…for a profit.

How can I make this work(Creativity needed)? Long! - Posted by Brian-Northern NJ

Posted by Brian-Northern NJ on February 17, 2002 at 16:31:23:

I currently ran into a situation where a man is trying to sell a four unit aparment because he wants to buy his own single family. He lives in one unit, one unit is empty, and the other two are being rented at about 65% of FMV. The reason the rent is low is because the guy is a really nice, laid back guy. He mainly lets friends ect. rent the place. He currently owes $120,000 against the place. The structure seems pretty sound, but it needs a good $20-25,000 in cosmetics. Fully rented and repaired I think the place is worth $280,000 he wants $260,000 so there’s not much equity, but he acts like he’ll bring it down quit a bit if someone can close fast. I also think I can bring him down through negotiating. I want to wholesale the place. I’m wondering if anyone has any creative ideas whereby I could get him agree to less right now so investors would be interested, take over the carrying costs, put money into it and have him cash out for more later. Like I said, there is low equity now, but I think he would be open to a win-win creative solution to get rid of the place.

Re: How can I make this work - Posted by Brent_IL

Posted by Brent_IL on February 17, 2002 at 23:46:28:

$25,000 is a lot of cosmetics.

I’d keep talking about all the repairs and make a lowball, no financing contingency, cash offer. $200K or less. Then start telling him how much easier it will be to make his mortgage payments on the new house when you pay him monthly on the higher price you can give him by buying on terms.

No motivation… - Posted by Rene Perrin

Posted by Rene Perrin on February 17, 2002 at 16:59:07:


There doesn’t sound like much motivation in this one. His asking price is 95% of what it’s “worth” and when you tag on repairs, he’s not even close.

Selling or wholesaling a tenant-occupied building (multi-family) can be tough especially considering the below market rents. In NJ, depending on the town it can be very difficult to raise rents on tenants- I believe the accepted rate in court is about 3% annually. An investor isn’t going to be too interested in getting involved unless there is a steep discount.

I would suggest that the guy do a cash out refi and sell it subject to the new financing. The problem is going to be that the below market rents are going to hinder him financing what he’s probably looking for.

Brian- Don’t take this the wrong way- I think you are looking to make a deal where there isn’t a lot of motivation on the seller’s part. If he had a contract on another place, was in eviction court, etc., you might have a case. What I’m hearing you say is that the guy wants close to market value but will consider something if it’s a quick closing.

Spend your time with a MOTIVATED seller. That’s what will generate a payday for you.

Just my 2 cents.


Possible Solution - Posted by Brian-Northern NJ

Posted by Brian-Northern NJ on February 17, 2002 at 17:56:04:

I was wondering if this sounds like a reasonable solution. What if I(or the investor) where to assume the exsisting $120,000 mortgage and use seller financig for the exsisting equity. I could make an agreement with guy that we would pay him so much a month. The amount would be very small at first, but would increase as his unit and the vacated unit are rented and as the rent for the other two units increases. Then we could make balloon payments as time goes on.