Posted by Marc NJ on August 14, 2003 at 23:29:02:
Here, Here ,well said.
Need help structuring deal . . . . ??? - Posted by Mike_MS
Posted by Mike_MS on August 14, 2003 at 15:58:09:
First let me thank everyone for all the good information on this board. Although, I decided to go ahead and ask the question so I can get this deal structured rather than continuing with all the reading. Any help would be appreciated.
Situation: Man in neighborhood is building a house. He just started paying 2 mortgages until his new house is constructed. He wants to sell me the other (one in currently lives in) and is willing to negotiate some good terms. I could possibly get this house for appraisal or less and no money down. What would be a good way to structure this where we both could have a WIN-WIN. I was thinking about going ahead and doing some type of purchase and then let him rent until his is complete and until he can get out. I just want to do what is reasonable for both parties. He would like to get away from 2 notes and I would like to pick up a house and help.
Thanks in advance!
Re: Need help structuring deal . . . . ??? - Posted by Phillip
Posted by Phillip on August 15, 2003 at 11:01:08:
I know two People that have bought several houses at appraised value. Number One bought three and could not figure out why he did not have an abundance of cash flow. Tired of losing money, he sold all three and broke even. #1 thinks he makes his money on the back end, not the front. Number two bought four and started out spending lots of money replacing things that broke or needed repair. New roof, kitchen appliances, tile floors, etc. Hummm…wonder if that is why #2 is working alot of over time at his job. I thought investors were supposed to MAKE money off their investments.
Tell your guy to knock off at least 6-7% not to list with a realor. He will pay that when he sells through one. Won’t he pay a capital gains tax on that extra cash the realtor makes? How about the parade of buyers coming through his home that look and critisize His Home. What about repairs that should be done before selling? Buyers asking for repair allowances, if they decide to buy. How long it might be on the market = more payments he can’t afford. How is your market…can he get what it appraises for quickly?
Can you take it sub to and give him a small second, with no or low interest? If you got in a bind could you unload this prop. quickly and not lose money. Negotiate or you will lose.
Just my thoughts,
Phillip
Re: Need help structuring deal . . . . ??? - Posted by Brent_IL
Posted by Brent_IL on August 14, 2003 at 17:21:49:
1 - WIN-WIN doesn’t mean that you need to pay full market value. His part of the WIN is that he doesn’t have to make double payments. If he finds the two payments difficult, how is he going to pay you the rent so you can make the payment? How is that helping him financially?
2 - I can buy at appraisal value with NMD at least twice a day. That wouldn’t make money because the risks are spread over too little profit. It’s necessary to buy below FMV. That’s part of the “creative” in CRE.
3 - Who appointed you to be the judge of what he considers “reasonable”? When you make your offer, you have to make an offer that makes sense for you. If a sensible offer can accommodate the seller’s desires, that’s good because it increases the likelihood of the offer being accepted. If you can’t do what the seller wants, you can’t make an unreasonable offer just to accommodate him. You have to stick with one that works.
There are enough houses offered for sale right now to support the families of thousands of RE agents. This house is one of them. Forcing a thin deal in the early stages of you investment career could short-circuit the whole process.
If the guy wants you to make payments, adjust the terms of sale so you can get a big discount at settlement. Many new construction projects take longer that originally anticipated, so turn some of his equity into your equity and set a definite closing date. You can always reopen negotiations, if needed.