It doesn’t really sound like a deal at (or near) that price based on the gross rent. You aren’t doing yourself any favors if you get it with zero down and you owe too much (too little cash flow and not enough equity). The only way you may justify a higher purchase price would be to buy with good terms. But the numbers would still have to work based on your exit strategy. Most of the investors on this forum would give the advice that you make your money on the buy. Meaning that you buy well below FMV or you buy with such good terms that the odds are really in your favor not to loose. There are some investors that will suggest it?s alright to buy at FMV and wait for appreciation. That may be fine, if your 99.999 % sure of the appreciation. I’m going to stick with the former because my crystal ball is broken.
Some additional information may help others answer your question. Such as:
The FMV (for retail sale)?
Location?
Your maximum purchase price?
Your exit strategy…Are you buying for appreciation, or cash flow, or both. Do plan to hold for 1 yr, 10yrs, or 20 yrs?
How should I structure possible deal? - Posted by J. Gipson- IL
Posted by J. Gipson- IL on April 27, 2007 at 14:32:16:
found a residential property listed for $92500 obo. seller might assist in financing but would prefer contract with 15% down and 3-5yr balloon payment with review of credit for his protection. My county’s tax assessor’s website lists the market value for this property at $80528. The estimated rental value is $750 - $850. He used to rent the house out for $800 and his last tenants moved out this past November. After his tenants moved, he put a new roof, windows, doors, carpet, and updated the kitchen. This would be my first deal as I am new to this and I was wondering if I could get help on how to get this deal with no money down. I have no down payment and my credit is not at all good. How can I structure this deal?
You’ve given the tax assessed value, but not the fair market value. You need to find out what this thing would sell for RETAIL first!
From the looks of what you’re telling us, this does not appear to be a good deal at all. Sounds like you’re talking with an investor that is looking to sell at retail, and isn’t even motivated to unload the property at a discount price.
Start looking for MOTIVATED SELLERS…that is where the money is! You’re in the PROBLEM SOLVING BUSINESS, you’re not in business to buy every house that comes your way.
IF you want to make some money this week – Do this one simple thing:
Drive through the tougher neighborhoods (if you can’t find five junk houses in 20minutes, then the area is too nice) armed with a notebook. Write down every boarded up, junk UGLY property that you see. Once you get home, go online to your Property Appraisor’s website and locate the “Mailing Addresses” , where the tax bill is sent. Enter that info into whitepages.com and start calling these people!!
“Hey I noticed that you have a property located at XYZ Avenue…what are you doing with it? etc…etc…”
There will be quite a few addresses that do not have phone numbers. That is fine, keep track of the addresses and send them a letter. You will get results this way.
THEN Post the info on the properties and we’ll direct you on if it’s a good deal or not.