Need help structuring a LO offer - Posted by Karen (NY)
Posted by Karen (NY) on December 31, 1998 at 21:11:47:
Hi experts and Happy New Year!
Spoke with an out of state owner today. (Just called the # on a tiny sign on a house.) She is interested in LO and glad that I called. I promised to call back Monday with numbers and to talk to her and her husband. Since this will be my first offer ever, I’d like your input.
The house is a 12 year old (with major renovations 2 years ago) 3BR 2BA ranch. It has a rental cottage on the property (2.5 acres) that is rented for $400 per month. It has been empty since 1996, when the owners moved to NC. It is in GREAT shape.
Asking - $150,000 (“willing to drop”) She almost accepted an offer for $135,000 last year, but they wanted the property subdivided (ok according to the survey, but they share water and septic). $150,000 is the appraised value from last year.
PITI - approx $400
Repairs needed - none
House has been listed all along but has only been shown 5 or 6 times.
My thoughts on an offer:
-see what she needs/expects from property and then stay within these guidelines (or less)
$900 monthly rent for house and cottage (gives owner $500 cash flow) - I could go to $1000
25% rent credit ($225 per month at $900 rent)
$125,000 purchase offer - could go to $130,000
For prospective tenant/buyer
$800-$850 monthly rent (+ $400 from cottage)
$125 per month rent credit
$139000 sales price
This seems to work out well with a $10K+ profit, depending on the spreads. Am I missing something? What about the cottage? Do I need to subdivide, or can I keep it as income property to attract more tenant/buyers?
My big concern is this. I live in a fairly poor area (average household income is $17,000). Average rent is around $500, but nice houses go for about $750. Much property is owned as vacation homes for people from around NYC. While there are tons of motivated sellers (slow RE market) and lots of renters, I’m not sure how many can afford to go LO, especially with this price range. I really don’t want to get burnt right out of the gate.
Suggestions are greatly appreciated, as always!
PS - She also has another house, which they just dropped the price from 215K to 150K. She wants to know if I could do something with it. (Second marriage for both. They had two houses to sell when they started their new life.) I haven’t seen it. She says it needs some interior sprucing up, paint, etc. They own this one free and clear and are currently renting it. (Don’t know how much.) Taxes are about $4800. It’s a 5BR, 2BA ranch on 9+ acres. I haven’t even begun to think about this one, but the price drop is intriguing. Again, the economic atmosphere here concerns me. Thoughts? Thanks!