I'm not sure if I have a good deal or not? - Posted by Tim (CT)

Real Estate Investing Real Estate Financing
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Posted by Tim (CT) on March 08, 2001 at 09:42:25:

Thanks for your input Ed. In response to some of your questions, I have taken into consideration ALL of the monthly expenses including maintenance, taxes, insurance, vacancy rates, etc. The $450/mo is truly positive cash flow.

I agree with your statement of offering a low ball figure. The realtor I’m dealing with tells me there’s another buyer that really wants the property. I don’t know if he’s telling the truth or not. So, theoretically, I’ve got some competition. I’m probably going to offer them 92k (there asking 99,900) initially and see what they do. If they get another offer from the other buyer, I’ll just ask to consider a counter from me. I have a value in mind that I don’t want to go over. So, I do have some room. If we agree on a value between 92 and 100k then that will be ok.

You had mentioned getting pre-approved for financing. Can I do this with any bank/lender? Even if I don’t end up going with them? What’s the best way to do this? Is it better to get pre-approved for financing before you make any offers, especially if I’m just starting out? Sorry for all the questions.

One last thing, I want to personally thank you for taking time out of your busy schedule to answer not only my post but all of the other posts that are directed towards you. You give me (and probably others) alot of inspiration just by giving us some personal attention. Thanks again.

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I’m not sure if I have a good deal or not? - Posted by Tim (CT)

Posted by Tim (CT) on March 08, 2001 at 08:29:46:

I have an opportunity to purchase an immaculate 3-family home. There is no mortgage on the home and their are five owners (all family members). The house is listed at 100K and even if I offer this price, I will have a monthly positive cash flow of $450. I am just starting to look at this deal and, of course, the RE agent has told me that he doesn’t think they would be interested in taking back a 2nd because there’s too many owners involved. I see his point but I’m not convinced because it’s coming out of his mouth! I have access to a LOC and was thinking about putting down 5% (10% would give me even more of a positive cash flow). Based on all of the posts on this board, I feel that I’m not doing what I’m setting out to do which is to purchase good quality properties at low prices with no money down. Now, I know from what I’ve read that these deals are out there. I personally haven’t seen any of them but I have seen deals like this. The deal wouldn’t be very creative and I would be dipping into my LOC. But, I look at the end result and see $450 going back into my pocket on a monthly basis.

My point is, which way should I look at this deal (or shouldn’t I?) If the owners won’t move on the price and aren’t willing to take back a 2nd, is $450 positive cash flow per month still good? Should I walk away from the deal because I would have to dip into my LOC to make it work. From what I can see, there aren’t alot of multi’s for sale, period, let alone one that’s in good condition.

Any thoughts? Thanks in advance.

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Re: I’m not sure if I have a good deal or not? - Posted by Ed Garcia

Posted by Ed Garcia on March 08, 2001 at 09:21:55:

Tim,

You ask some good questions. The first thing I’d like to share with you is that good deals are not just lying around. In most cases we have to make them.

We have to be opportunists and look for motivated sellers and situations. You’re right when you mention not going along with your realtor. Realtors try not to let the deal get complicated and will tell potential buyers information that is not true, or in most cases the realtor doesn’t really know for sure and is just assuming.

Realtors can be deal killers. If they don’t like or want to go along with an offer, they will either tell you that the seller won’t do it, or present the offer with a negative inclination.
They sell by insinuation rather than by fact. Enough said, you’re doing the right thing. In most cases, if I feel my realtor is just order taking with me, I’ll circumvent them.

Tim, when you say that the building will throw off $425.00 per month positive cash flow even if you bought it at asking price. I hope you’re taken into consideration 25% for vacancy and expenses. Another words, I’ve seen new investors figure their deal by taking gross rents and subtracting there predicted mortgage payment, taxes, and insurance only. If you have plugged in 25% and have a $425.00 positive cash flow, I think that speaks for it self.

Tim I won’t kid you, I’m a tuff buyer. Because of that, I’ve missed a lot of good deals. My philosophy is, I’d rather be sorry for the deal that I didn’t do, rather than the one that I did.

I like to make my money on the buy. I’ve got a big ego Tim, and I know that it doesn’t take any talent to pay full price. I also know that if I can chip away at the price, it automatically increases my cash flow just that much more, so they do go hand and hand.

If this were my deal, I would make a low ball CASH offer. Now I realize that you don’t have the cash, so I would already have my financing lined up, by getting pre-approved for a loan. If I did that, chances are my offer will not be accepted, or it will be countered, and that will set the stage for me to make a counter offer at a higher price with a seller carry-back.

May the force be with you,

Ed Garcia

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Re: I’m not sure if I have a good deal or not? - Posted by sev paso

Posted by sev paso on March 08, 2001 at 09:18:53:

hey, tim
im a newbie myself when it comes to creative financing.you have found a deal that to me sounds pretty good(if those are the numbers)if you put down 5% or $5,000 and at the end of the 1st year you make back $5,400, why would you let that deal pass? Again i am a newbie so take my advice for what it’s worth, but if the numbers make sense…