Posted by JohnBoy on December 28, 2001 at 13:36:20:
If you will be buying a property where you will be putting new financing on it in your name, then assuming the property is in excellent condition, meaning NO repairs needed and just move right in as is…the MOST you would ever want to pay is 80% of fair market value. If it needs any work then deduct all costs from the 80% figure to get to a price you would be willing to pay.
So on a $145k house that is in tip top condition needing no paint, carpet or repars of any kind, then $115k is the most I would consider paying if I were buying it out right and putting a loan on it in my name.
Now if I were buying the house by leasing it from the seller with an option to buy and getting a minumum of 3 years or more to exercise the otion OR if I were just taking over the seller’s mortgage payments on their loan and the seller was willing to take payments on any of the equity they needed to get out of the property…then agreeing to a purchase price of $140k wouldn’t be a problem.
As for how much I would put down to give to the seller goes…nothing to a maximum of maybe $2500 if they NEEDED some cash for moving expenses.
Then I would make the deal subject to me first being able to find a suitable tenant to place into the property within 60 - 90 days. That gives me 2 - 3 months to find someone to L/O the property to. Then once I find my tenant/buyer I would get a minimum of $5k up front from them, take up to the $2500 needed to pay the seller and pocket the rest, collect some monthly cash flow by leasing to my tenant/buyer for more than my payment amount to the seller, and creating another profit on the back end by setting my selling price to my tenant/buyer at about $160k - $165k.
The percentage that YOU need to DO a L/O with the seller is usually $0. The percentage you collect from your tenant/buyer is usually 3% - 5% of your purchase price.
For more info see my post on “ATTN: NEWBIES…START HERE!” at this link: