Updated almost 6 years ago on . Most recent reply
Purchasing strategy for multiple properties sold by same owner
I remember listening to a BP pod cast and the investor talked about asking questions. I was talking to my real estate agent about a small duplex on the market. The duplex is being sold by a real estate investor and has tenants. So I asked why is the investor selling? The agent proceeds to tell me the investor is retiring and wants out of the business. Turns out the the investor currently holds 8 properties in my town alone. All the properties need some TLC. I'm waiting to find out what the current revenue is on the properties, but I'm extremely new to real estate. Has anyone had experience negotiating a deal involving multiple assets at one time?
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#5 All Forums Contributor
- Plymouth, MI
You just discovered, the biggest pot of gold this side of your nearest rainbow. The retiring REI.
Most likely, the property (properties actually) are paid off...100% equity. This opens the door wide for seller financing.
Sellers Problems:
1 - High tax ramifications. 100% of the sale = profit=high tax bracket.
2 - Property probably doubled in value from the original purchase...when it cash flowed. There are only two possible buyers, a homeowner and/or REI.
a - Homeowner is the only one of the two that would pay current price...that is if they were interested in buying house with a tenant in it...which they are not.
b - REI not likely to pay full price because the property wouldn't cash flow then.
If seller/REI wants to sell, they need to at a reduced price...which is all profit anyway, so they would agree to it. How low though? The answer is, (drum roll): Full Price offer...along with Seller Financing.
Problem solving:
1 - Income not the same, so taxes are lower.
2 - Seller financing terms: 10% DP; lower interest rate than current going rate.
Why would seller agree to this? They make more money this way. Remember, the interest on the loan is also income to them.
Hold th property for a year or two (or a month or two), and sell the entire package for twice the cost (10% cost>>>20% sale).
Rinse and repeat...on twice as many properties (or twice as large a property).