Maybe not so spoiled after all. - Posted by Joe
Posted by Joe on April 06, 2003 at 23:17:39:
I know it’s been a while, and I don’t want you to think I forgot who helped me get this far on our first deal, so here’s the late check in…should probably have been sooner for my own sake.
Last time you wrote back to me you told me not to get spoiled because many deals like this would have already fallen apart. I’m starting to see some of the reason why maybe this one didn’t.
During our due diligence for this 5 suite office complex that we have under contract for $270,000 (80% owner financed, 25 yrs. 6% int., $26,039 NOI), we found that 4 of the 6 AC units are 1978 models on their last leg($4,000 a piece) and some of the tenants were actually non-paying termites.
To make a long story short, our broker(after filed extensions to close April 11th) incorporated addenda on the Buyer Inspection And Seller’s Response form requesting that the Seller take care of the termites and take $20,000 off the down payment for AC’s(plus $5,000 of other needed repairs on bldg. insp. report), and $19,000 of mis-represented income due to vacancies.
If the seller doesn’t tell us to take a hike (this $250,000 is what she paid for it years ago), we are justifying 3 to 6 months of negative cash flow with the intrinsic value of the building and the upside that the future tenants will be under OUR terms and will make up for any loss IF we end up paying what the building’s really worth.
These ideas are shared by several people including my brother/partner and our broker who says he wouldn’t let us get hurt and wants our future business(and disagrees with us as to the amount we’re asking for). I hope I’m not burying my head in the sand just because I’m already into this deal for $2,500 gone for good(ALTA Survey,termit insp, Bldg.insp etc.).
As always, any input is greatly appreciated,