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Posted about 9 years ago

The negotiation

Hi All,

Well it’s been an interesting ride thus far, filled with excitement, anger, headaches and happiness….. and we haven’t even closed yet..

Two weeks ago, my realtor and I went out hunting for my first buy and hold rental property. I’m fairly handy, and what I don’t know, I have my dad the internet to help me out.

My criteria consisted of the following:

Budget - $120k or under

HOA – Under $350 per month

A fixer-upper needing under $10k in renovations

A positive cash flow of at least $3,000 a year.

Now first off, my realtor is amazing and I look at him like a mentor. Not only did he want to show me condos that fit my search, but he wanted me to get a sense of the market. We looked at everything from, Studios up to 2 bed/2 baths, and even a multi-family unit. With each showing he gave his perspective on the place and if he would or wouldn’t buy it and the reasons why.

However, the first condo he showed me fit me like a glove the second I walked in it! Traveling around to the other properties was a great learning experience, but all day I couldn’t stop thinking about the first condo.

It was a large studio that had be converted into a small 1 bedroom. It had a partial view of the city and a great view of the lake. Looking around, the place had a small updated kitchen (but old appliances) and carpet throughout the unit. The bathroom looked like it had been redone, however the tile job was terrible, the person never removed the toilet or the sink and just tiled around them, same goes for the shower faucets…… and even worse, the person removed the tub to make it a walk in shower. Another thing I noticed was this place has 6 closets…. That’s right 6! One big one in the bedroom and 5 small ones in the hallway near the kitchen. One final problem was the lighting, there was only one light in the kitchen and one in the bathroom, that was it for the entire condo.

This was my thought process:

  • First expenses - My mortgage, HOA, insurance, taxes and expenses after its rented, came to $850 per month. Fixed up, I could rent the place for $1,200. This is a cash flow of $350 pm or $4,200 a year!!
  • Next, what work needed to be done:
  • §In the kitchen I will add new appliances, I will also remove 4 out of the 5 closets opening up the kitchen, not only making it larger but also create an open floor concept. With the added space I can now add a floating island for extra cabinet space and a new prep area.
  • I will add engineered wood floor through the entire condo.
  • I will completely redo the bathroom with new tile and include a tub into the new design.
  • In regards to lighting, I will create a floating ceiling around the edges of the bedroom and living room, 6in tall, 1.5ft wide, this will keep the height of the 8 foot ceilings intact, while allowing me to add recess lighting to the rooms.
  • Over estimating and considering me and my dad will be doing most of the work, it added up to $8000. I added another $1000 just in case, so $9,000 in total.

I spoke to my realtor and wanted to put in an offer. The place was listed for $100k, I was fully able and prepared to pay the full amount, but we decided to low ball it. We ended up offing $80k. The next day I was told there was another offer and to give my best price. Being comfortable paying the full amount and not wanting to lose it, I offered $92k.

A week goes by and I’m freaking out! Why is the Bank taking this long to make a decision. First thing I thought was “they are trying to play me, who do they think they are!”They finally came back with a counter and asked for $99k. by this time I calmed down a bit and decided to offer $95k.

Another week went by and again I started to get impatience and mad. The bank countered with $97k, but this time I am furious. I wanted to take whoever that person was at the bank and put them in the thunder dome! I mean, I increased my offer from $80k, to $92k, to 95k and they wanted more!!! My realtor calmed me down and we decided to give a final offer of $96k. Now I know what you’re thinking, “Phil, you were prepared to pay the full $100k”, yes I was, but it’s the principal of it! They made me wait 2 weeks, and I increased my offer several times but they still wanted more, I couldn’t believe it!

Anyways, after 2 days of waiting and dreaming about beating up a banker, they finally came back and accepted my offer!

Now begins the 45 day process of getting the funds together, the inspections, the paper work and hopefully the closing!!!

I’ll be sure to keep you in the loop as I continue throughout the closing, remolding and renting process!!

Thanks for reading.

Phillip Faries


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