Posted by Rob on September 15, 2004 at 15:54:41:
Thanks Jim,
I like your down payment idea!
Is this a good or bad deal - Posted by Rob
Posted by Rob on September 15, 2004 at 12:04:02:
There is a duplex (vacant) I am looking at in not the best neighborhood (not the worst either). The property is being sold through an agent for $35,000 (there was an an accepted offer several months ago for $29,000 but fell through). The property is worth $42,000 needs about $2,500 worth of work I can do myself. Total rent income is $950. The property has been on the market for some time now. The owner is willing to sell on a land contract. The agent says he wants $5,000 down. The owner owns the property free and clear.
I don’t like the terms above. The only way I can see making this deal is to offer somewhere around $29,000 with very little if any down. Any suggestions?
Re: Is this a good or bad deal - Posted by John Katitus
Posted by John Katitus on September 16, 2004 at 01:22:54:
I probably wouldn’t be too anxious. Why are both units vacant? Is there a sufficient pool of qualified tenants? There might be a surplus of this type of unit avalable for rent.
If you find that it is rentable you could offer some type of creative financing - the realtor could take payments for his commission. 7% of 29k is $2000. Closing costs on a land contract should be about 0. I don’t know your State, but here in Ohio we just write them up and sign them in about 5 minutes.
It sounds like you are just dealing with the listing agent. Remember, he’s the enemy and is trying to get as much from you as possible. If you get an agent to represent you, you can write up an offer stipulating land contract, percentage, etc. This would be difficult to do with the listing agent, although if you work with the listing agent he gets the whole commission. If your numbers are right, I would probably be thinking 25k, 2000 down, land contract at 6%.
This isn’t the kind of deal that disappears quickly, though, so take your time.
Re: Is this a good or bad deal - Posted by Stretch361-mi
Posted by Stretch361-mi on September 15, 2004 at 15:58:26:
I like the way you come up with the interest rate here.
It is very possibly this may be a good deal, but you will need to figure out how much per month he is going to want. If your bringing in $950 per month in rent, but he wants $700/mo payments, it’s running relatively thin.
Make sure the CASH FLOW is correct.
Re: Is this a good or bad deal - Posted by Jim FL
Posted by Jim FL on September 15, 2004 at 15:23:04:
Rob,
If the $29k offer is what works for you, then that is what you should offer.
However, take into account the fact that the property is listed, and the seller will have to pay commission.
This is probably where the down stroke comes into play.
The seller needs or wants this to pay the agent/broker, as well as costs to close the deal.
Perhaps find out what it could cost to get the deal done at $29k, and pay that in cash, as your down.
Then your balance is lower anyway.
Negotiate a good interest rate, in fact, don’t mention one and see if you can get it written up for no or very low interest.
When doing land contracts myself, I like to take sheets that show the current rates being paid on CD’s at local banks…usually very low these days.
This way, if the seller wants to talk about interest, I can use this tool.
I always ask sellers, “If this were a cash transaction, and you placed the funds into a CD, at the going rate of x%, that works for you?”
When they agree, we now have our interest rate, or a place to start.
I prefer to pay a little less, because after all, the deal is secured by Real Estate.
Anyway, just my two cents,
Jim FL