What should I offer/How should I play this? - Posted by Adam (Austin)

Posted by Tray Giddens, Houston on January 09, 2003 at 19:38:56:

An ARV of 125000 equals about 90 bucks a month on homeowners and that’s with out some rediculous mold claim on the property or some other circumstance…many homeowners in houston have been bamboozled into making mold claims and are just now realizing that their policy , (if not Cancelled) has tripled… i was doing an open house and talked to a lady whose homowners insurance went from $1000 per year to $3200 per year. yup, mold claim :frowning:

just to be safe, let’s say the taxes are $250 per month. that’s $340 bucks a month just for taxes and insurance plus $632.07 in principal and interest if you finance it at 30 years at 6.5 % that all adds up to $972.07 in expenses.(excluding the stuff that needs periodic repair)… can you then still afford to rent it out for 1k a month?

Tray Giddens, Houston

What should I offer/How should I play this? - Posted by Adam (Austin)

Posted by Adam (Austin) on January 09, 2003 at 18:39:08:

Seller called me with a 3b/2ba, 2 story SFH, 1460 SQ. FT.

My comps. in the area put it at an ARV of $125K.

Although I won’t know for sure until I actually see the house tomorrow, it sounds like it just needs minor cosmetics.

The seller fell into some money and owns the house free and clear. He’s already purchased another house and is still moving stuff out.

He mentioned that he would like to get $100K for the house, in the condition that it’s in.

The house will rent for $1,000 a month. If I convert the garage, then perhaps $1,150 or maybe $1,200 a month.

If I go out tomorrow and the house only needs $2K-$3K to fix it up… what do y’all think I should offer him?

  • Adam.

Re: What should I offer/How should I play this? - Posted by Heather -Tx

Posted by Heather -Tx on January 09, 2003 at 19:22:07:

Depends on if he is open to terms or wants all cash. At least this usually makes BIG difference in what I offer.
For terms and owner financing with payments monthly that would leave you a nice cashflow still…, he could get his 100K (Even though I would still try for less…)
But if he wanted only cash ? A WHOLE Lot less… Tying up 100K in one deal, when you could get into numberous deals with that much cash instead, doesn’t always make the best sense IMHO. But it would all have to do with what you planned on doing with the property, your exit strategy.
I look at it like this… I Would rather buy ten houses with 10K down in cash each (Prefer MUCCCH Less lol) Or one house tying up 100K to make 25K profit. Any way you look at it though if your ARV Is correct is a nice equity to start with I just hate tying up that much.

Just how I veiw things , doesn’t make it right… just right for me! LOL


PS Sorry for the rambling it’s been a long day putting up signs, flyers and handing out cards… but I enjoyed EVERY minute of it.

Re: What should I offer/How should I play this? - Posted by Adam (Austin)

Posted by Adam (Austin) on January 09, 2003 at 19:25:11:

Yes… that’s pretty much what I was thinking, too. Make multiple offers.

Where I’m having a brain stutter thought is with the best way to structure an owner fin. $100,000. What should I suggest to him?

Thanks (Keep rambling… I like it!)

  • Adam.

Re: What should I offer/How should I play this? - Posted by Marc

Posted by Marc on January 10, 2003 at 10:24:28:

I agree with Tray’s post. Find out what he’s paying in taxes and insurance. This will give you an idea of how much less monthly flow you have to work with.

My offers would be:

  1. Seller Financing - you name the monthly payment, and don’t even think about interest and stuff. How much would you be willing to pay a month (including the above mentioned T&I) to make a profit. Sure, you could pay $600/mo for 30 years (P&I), but why not pay $550/mo for 15 years (no interest). Just name the monthly and the terms, and see what happens. If he asked about interest, ask him does he need it? Heck, offer him $110,000 @ 15 years, with no interest. You’re still coming out better than offering interest to him, and you’re paying for it in half the time.

  2. My cash offer would be around $78k, and even with that, I would do it for immediate resale. A long-term loan on an investment prop is still giong to have your payments in the mid-600/mo range (P&I).

  3. L/O for say $800/mo @ $100k. The seller has to worry about T&I until you exercise your option to buy. Your cash flow may actually be better with this option, the seller is getting more a month (which looks good in his eyes), and it stays out of your name. Negative is that the owner may wise up one day, and think if you can do this, than he can too, and try something funny.

Good Luck,