What's the Best Way to Buy 1/2 a House? - Posted by dmarketing

Posted by dmarketing on September 18, 2002 at 13:36:57:


I really appreciate your feedback and will take your advice to pass on this one!

…On to the next opportunity. :slight_smile:


What’s the Best Way to Buy 1/2 a House? - Posted by dmarketing

Posted by dmarketing on September 17, 2002 at 20:40:23:

Hi Everyone,

Hope your investing is going great!

I’ve been challenged with an interesting deal scenario, as follows:

A senior citizen contacted me to see if I buy her half(1/2) of a two family house in NYC. The house which is owned “free & clear” by her and her nephew. The nephew lives in the house; senior citizen does not.

  1. House Appraised at: $440,000
  2. Senior’s rental income: $1,350/per month
    This 2nd floor apartment has been fixed-up by the senior.
  3. Nephew’s apartment has NOT been fixed-up & needs work.
  4. Nephew’s buy-out offered to senior: $150,000 (He can easily get a new 1st mgt to buy-out the senior)
  5. Senior wants more based on appraisal.

Given the potential headache in dealing with the Nephew to get access to the basement and yard, my reaction is to pass-up this deal & suggest she counter offer the nephew and ask for $180,000 buy-out.

I haven’t been able to come-up with a workable offer that makes viable financial sense for me as an investor. Any recommendations? Thanks!


Don’t… Here’s what the co-owner could do. - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on September 17, 2002 at 22:00:32:

D Marketing----------------

I agree with you, don’t buy that deal. Just take a quick look at that rent to property value ratio. Assuming her unit is worth about 1/2 of the appraisal, it is worth $220K. The rental income each month is about 0.61% of her unit’s value. Not a good ratio, to my way of thinking. If there will be good appreciation to be expected, then one might live with such a low ratio.

I suggest that you help her out by suggesting the following. She and the nephew sell out and split the sales proceeds. I feel since her unit is in good shape she should get more than 1/2 of the cash. I can see the newspaper classified ad now: “Half fixer, Half nice.”

She and the nephew could solve their situation this way. They flip a coin, with one person choosing heads or tails. The person who wins the flip then proposes a value for the whole property and that each unit is worth 1/2 that value. (Or there could be some differencial based on difference in condition.) The second person, who did not win the flip then has a choice: sell at the price suggested or buy at the price suggested. And the winner of the flip has to go along with the choice. That $180K value would disappear in a second if the nephew were proposing the value. He knows that his aunt will buy him out and have a good deal if he proposes that figure.

Oh, I have been assuming that the appraised value is somewhat realistic. If you feel that the actual value is much greater than the $440K, you might propose to buy the who building for that price and then flip it to some owner-occupant buyer(s) for more. Or buy the one-half for $220K then start a partition lawsuit action to force the sale of the whole building.

Good InvestingRon Starr******