Posted by Heidi W on March 06, 2002 at 24:22:59:
I’m too new and inexperienced to give you any advice on this deal - but it certainly sounds like a good one.
Anyhow - just how did you find these people…that’s what I’d like to know.
Thank_you_kind_sir
I need good feedback (serious) - Posted by Fletch
Posted by Fletch on March 06, 2002 at 24:06:16:
Tonight I met a couple of folks who might end up being my new best friends. They may have brought me my first deal. They are in their sixties, have been starting and running different business ventures including real estate investing for 40 years. They told me that they are tired of landlording and are looking to sell a few of their properties. I asked if they were planning on cashing out. They said not at all. They would be able to carry financing. I said what kind of down payment would you need. Wait a second, I am so excited that I’m getting ahead of myself.
The property is a 4 family in the best neighborhood in the area. Property values keep going up. Crime is nonexistent. They have been renting to three older couples and a microsoft exec who is never there for the last 12 years. Payments are always on time. (I’m really wondering why they would want to sell.)
Anyways, they are asking $300k. I said what kind of down payment would you need, 10%…?
They said,“not neccesarily.”
At this point I was trying to hold it in!
I asked about rent and they said it brought in $2600 per month.
Now, I haven’t looked at it yet, but I’m thinking. 15k down.
Owner financing 95% over 30 years @ the best rate I can get. Maybe they will take 6.5% I’m looking at mortgage payments of $1850?? But I don’t know how to calculate insurance and taxes without calling the right professionals.
Can anybody out there help? What do you think? Time is of the essence. Anybody out there who reads this, please give me your ideas. I’ll be waiting.
Thanks,
Dan Fletcher
I can’t wait to send JP my success story about my first deal.
Re: I need good feedback (serious) - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on March 06, 2002 at 05:00:17:
Fletch-------
Listen to JohnBoy. His is the best advice you have received so far.
Now, if you can get below-market financing from them, you might want to pay more than JohnBoy would. Watch the cash flow–that is your guide.
Note that very low down payments often lead to negative cash flows. However, consider potential appreciation and tax benefits when you scope out a deal.
I think JohnBoy is right, wanting $100 or more a month positive cash flow. However, that could be after tax benefits. So calculate your after-tax income/loss on this property.
Typically, the “best” neighborhoods are the worst places to invest for cash flow. You make money in the below-average neighborhoods. I recommend buying in as low neighborhoods as you can stand.
Good Investing*Ron Starr
Re: I need good feedback (serious) - Posted by JohnBoy
Posted by JohnBoy on March 06, 2002 at 03:47:13:
They are asking to much! This property will end up with a negative cash flow based on those numbers.
After adding in for expenses this deal won’t pencil out. Just because you might get a deal where the seller will finance doesn’t mean it’s a DEAL! You have to be able to make a profit and that’s after you allow for repairs and maintenance, deferred maintenance, vacancy factor and management. Even if you manage yourself you need to be able to get paid for your time involved with managing.
I would only pay up to $230k at most based on the numbers you have given. Anything above that then you better have extra cash on hand for out of pocket expenses because you’ll end up in the red! You’re in this business to make a PROFIT! Not just for the fun of it so you can say you purchased and own a property with seller financing!
At $230k you should make about $400 per month after all costs. That would be $100 per unit which would be decent.
Re: I need good feedback (serious) - Posted by Anon
Posted by Anon on March 06, 2002 at 24:32:10:
First of all, forget the 15k down payment…
He who mentions numbers first, loses. Ask them what is is they need. Solve their problems. Like you said, you are not sure why they would want to sell when the quity is there and payments from the tenants are on time. Be sure to do your due diligence on this one. Maybe they are just tired of the business, that’s fine. That’s fine, that means they are ready to deal. A motivated seller. They have already said that they don’t need the 10% downpayment. Ask them what they would need as a downpayment to feel secure. They may just ask you to pay for closing, with a small downpayment. You never know. The seller may see you as a younger version of himself and help you out. Try for a lease/option…shoot for $1000 down, offer $500 month and you keep the equity (or split it with them when you exercise your option in 5 years…and MORE equity has built up)
Good Luck…