Posted by dmarketing on September 18, 2002 at 13:36:57:
Ron,
I really appreciate your feedback and will take your advice to pass on this one!
…On to the next opportunity. 
dmarketing
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.
- House Appraised at: $440,000
- Senior’s rental income: $1,350/per month
This 2nd floor apartment has been fixed-up by the senior. - Nephew’s apartment has NOT been fixed-up & needs work.
- Nephew’s buy-out offered to senior: $150,000 (He can easily get a new 1st mgt to buy-out the senior)
- 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!
dmarketing
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******