Need help with L/O offer. Thx. - Posted by Ron (MD)

Posted by TomC (Md) on June 20, 2000 at 10:58:55:

Hi Ron,

I agree that a zero monthly spread is not worth sticking your neck out for. Especially if you are responsibe for lost rent if your T/B has to be evicted or vacancy while you put a new T/B in there!

Depending on where the townhouse is located, I would consider all your options. Up-county like in Germantown, the re-sale market for townhouses is slow, since the builders are still making more. That may make the FMV a little lower that what you would expect.

How much rent credit are you going to offer the T/B? With you only getting $100/mo from the seller, that leaves little room to offer any to the T/B. You may want to figure out exactly how much the depreciation deduction will be for the seller. I’ll guess that the house is worth 60K and the land is worth 40K, so the seller should see about $200/mo depreciation. So you might actually be able to pitch a $200/mo rent credit to the seller, and offer $100/mo to the T/B.

Good luck with it!!

Need help with L/O offer. Thx. - Posted by Ron (MD)

Posted by Ron (MD) on June 20, 2000 at 07:30:05:

I want to make a proposal to a seller, but I’m struggling with how I approach the monthly $.


Market Value: $102.5 (was listed at $112 for several months, now at $102 for last three weeks) House is only 3 years old.
Mortgage Bal.: $ 88
Monthly Pmt: $ 945 (includes $120 condo fee)
Market Rent: $ 950
Motivation: Moving into another house in three weeks. Mtg for old house is in her name, mtg for new house is in his, so they don’t need to be off the old mtg to buy the new home.


  • Even though I see a comfortable front/tail end profit of at least $15k, I hate to get into a deal with no monthly spread. I’m thinking that the seller may be willing to take a $100 hit each month, allowing me that spread. My logic is that the seller retains the income tax benefit which will exceed the $100 hit – giving them a net after-tax profit each month.

Another approach would be to give the seller the full $850, but get a $100 rent credit. This would give me back the $100 per month in a lump sum when the option is ultimately exercised. The problem here is that I was not planning on offering them more than $1500 option price above their mortgage – to cover their closing costs down the road (they are high here in MD). That would mean that they would have to come out of pocket for the $100 per month rent credit.


  • I am also a bit nervous that this house is a condo (the $120 per month condo fee is included in the $945 monthly pmt) and it has no basement (most townhouses in this develepment, and in the area, have basements). Will my tenant/buyers overlook these things?


Ron Guy

Re: Need help with L/O offer. Thx. - Posted by SCook85

Posted by SCook85 on June 20, 2000 at 17:01:58:

I have learned two things so far when it comes to rent-first, their is no such thing as market rent. I always get more then what others tell me I can get, sometimes as much as $150 more. Second, basements are nice, but look at all the ohter ones in the development, some of them don’t have basements and people are living in them. I went through this same scenario with 2 BR’s. I’ve never had a problem selling a 2 BR home. There are areas here where every home on the block is a 2 BR, they are all occupied and I wonder whether or not someone will want my 2 BR (wake up, people wanted all the others is what I tell myself). Your market may be smaller, but you will still find a buyer.