Posted by bp on July 16, 2001 at 18:58:55:
1905 built date - they call them Tin Roofs.
Could use some creative advise - Posted by BP
Posted by BP on July 16, 2001 at 17:29:13:
I have a retiree that has quite a few properties. Due to health and age he is wanting to sell some of them. Here’s the deal. He owns 6 properties clear and free. 3 of the properties have 20 year tenants, one has 6 year tenant and two he has just rehabed and vacant ready to rent @ 550.00. He is renting the properties at 500.00. One unit is a duplex rent total 600.00 on this one. He wants 100,000 up front and will carry a second morgage for 125,000.00. His total asking price is 225,000.00. Total tax appraised value of the properties is 122,500.00. I’m new at this and I’m looking for options as he said most people aren’t qualifying or he doesn’t like the deal. Got any ideas?
Re: Could use some creative advise - Posted by JoeKaiser
Posted by JoeKaiser on July 17, 2001 at 09:34:24:
Whenever you run into “free and clear” properties, think “cash source.”
I’d write this up now. I’m not much of a fan of blanket mortgages, having been creamed in the past by a seller with a short memory, so I’d do the deal and break his $125k carryback financing up on the properties. But . . . I’d want half the property fully encumbered and I’d want the free and clear ones to remain that way.
Of course, not every seller will take that deal but that would be my initial direction. If he’s selling you a house that he says is worth $50k, he should feel just dandy putting $50k of his carryback against it.
End result, you end up with free and clear properties you can sell or finance for the cash to do the deal, cash in your pocket when closed, and 100% financing on all the rest of them.
I did a similar deal years ago and all went well until the escrow company talked the seller out of the deal, explaining it wasn’t such a hot deal, security wise, for her. Didn’t use that escrow company ever again after that.
Joe
Re: Could use some creative advise - Posted by JohnBoy
Posted by JohnBoy on July 16, 2001 at 18:30:15:
Can you qualify for financing?
If not, assuming he will subordinate to a second mortgage you could use a hard money lender to get the $100k to put a new first on the properties and get the seller to carry back the second for $125k.
Even if you had to pay 15% interest only on the hard money your payment would be $1250 per month. If you got the seller to carry the second at 7% amortized over 30 years that payment would be $831.83.
With $3,145.00 per month in gross income your cash flow would be at $1,063.37 minus taxes, insurance and expenses.
Re: Could use some creative advise - Posted by JohnBoy
Posted by JohnBoy on July 16, 2001 at 18:19:37:
What EACH property worth?
Re: Could use some creative advise - Posted by phil fernandez
Posted by phil fernandez on July 16, 2001 at 17:43:41:
BP,
If I’m reading your post correctly, you want to buy his duplex. The seller wants $225,000, but he’ll finance if you put $100,000 down. And the rent is $600 each side which would give you a combined gross rent of $1,200.
Question : Where’s the rest of the cashflow going to come from to pay your operating expenses and the mortgage and leave you with some positive cashflow. This is why we buy income producing real estate, whether it; a single family house , a duplex, or a 100 unit apartment complex.
Your seller is nuts. I repeat nuts if he thinks with a duplex that generates $1,200 per month that he can get $225,000 for the property. My guess is without seeing all your operating expenses that with that kind of income the property might be worth $100,000. And thats a little doubtful when you factor in the operating expenses.
Again I could be reading your post wrong, but if it’s what I mention above don’t walk from your deal. Run from it.
Re: Could use some creative advise - Posted by bp
Posted by bp on July 18, 2001 at 24:03:03:
Thanks Joe. I’ll keep this in mind as I build my offer letter
Re: Could use some creative advise - Posted by Tom – IN
Posted by Tom – IN on July 16, 2001 at 19:09:17:
Sounds to me like the price is a little too high.
Re: Could use some creative advise - Posted by bp
Posted by bp on July 16, 2001 at 18:31:50:
He has one property listed which expires in a few days @ 44,500.00. The tax value both land/bldg is as follows as of today:
house 1 - 22500
house 2 - 26000
house 3 - 18000 listed for 4 mos. no bites @ 44500.00
house 4 - 18000
house 5 - 25000
house 6 - 13150
no appraisals have been done. There is 3 homes in the area same structure/lot size average price is 55766.67. I’ve estimated $2832.60 for total expenses.
Re: Could use some creative advise - Posted by JohnBoy
Posted by JohnBoy on July 16, 2001 at 18:13:39:
I think he might be saying the seller wants $225k for all 6 properties as a package deal.
BP, do you want to clear this up?
Re: Could use some creative advise - Posted by BP
Posted by BP on July 16, 2001 at 18:11:44:
No sorry for confusion
6 houses
1 is a single family turned into a duplex @ 600.00
5 single family homes - 3 rented w/long term tenants @ 500.00 each
2 just renovated and ready for renting rent rate is 500 - 600.00 in the area.
His current income annually is 37740.00 if all were rented.
Re: Could use some creative advise - Posted by Doris - Va.
Posted by Doris - Va. on July 16, 2001 at 17:56:55:
Phil - I read his post as “rent total $600” from the duplex. That makes it $300 from each side. That’s even worse!
Doris
Re: Could use some creative advise - Posted by JoeKaiser
Posted by JoeKaiser on July 18, 2001 at 24:05:48:
Hey . . . I never said anything about an “offer letter.” That would be the last thing I’d do.
Go sit down and talk to them.
Joe
Re: Could use some creative advise - Posted by JohnBoy
Posted by JohnBoy on July 16, 2001 at 22:49:35:
$225k for gross income of $3145 is to much?
100% financing at 7.75% would be a debt service of $1612 per month, leaving $1533 per month minus taxes, insurance and expenses.
From looking at the numbers that doesn’t look to shabby to me. Of course, I don’t know what the properties look like or the type of area they’re in. But the numbers look good enough to look more into this deal.
Re: Could use some creative advise - Posted by JohnBoy
Posted by JohnBoy on July 16, 2001 at 18:34:39:
Tax values mean nothing. Listed prices don’t mean much either. You need to check on some comps for homes that have SOLD within the past 6 months to get a more accurate value.
Re: Could use some creative advise - Posted by bp
Posted by bp on July 16, 2001 at 18:34:06:
yes. I’ve just posted the tax and expenses. Two of the houses are renovated and ready for move in. The rest are rented and have been repainted and tin roof has been repainted. Pest inspection is current and fine.
Re: Could use some creative advise - Posted by JohnBoy
Posted by JohnBoy on July 16, 2001 at 18:17:11:
You said he wants $100k down and will carry a “second” for $125k? Are you saying he will subordinate the $125k to a second allowing you to put a new first on the properties for $100k? Or are you saying you need to come up with the $100k and he will finance the rest which would give him a $125k first against the properties?
Re: Could use some creative advise - Posted by BP
Posted by BP on July 16, 2001 at 18:13:00:
See my note to Phil. Thanks
Re: Could use some creative advise - Posted by bp
Posted by bp on July 18, 2001 at 13:45:03:
I’m not interested in all of his property. I’ve talked with him and he’s dropped considerable on his required down and I’ve got my property analysis done along with all the figures. I’m drafting several different options for four of the six properties. I’m just looking for all options that would make us both happy. thanks
Re: Could use some creative advise - Posted by JohnBoy
Posted by JohnBoy on July 16, 2001 at 18:35:49:
Tin roof? Are these houses or mobile homes?