Repair Credits - When the seller says no

[Chidi Osuji]

So my real estate partnership LLC (a couple friends and I) are under contract to purchase a 2-flat/duplex in Chicago. The inspection uncovered termites, basement floor joists needing replacement due to the termite invasion, moderate tuckpointing needed and a couple of things sured up on the back wooden deck. There were a few minor things needing long-term attention as well. Other than that it is a good investment, section 8-approved, fully rented GREAT cash flow. So we asked for the credit to pay contractors to address the termites, floor joists, the back deck repairs and half the tuckpointing quote, amounting to about $6,400. The seller will only cover the termite eradication (about $1400) leaving us to repair the rest. We are pretty much throwing what we can out of our pockets/retirement funds to cover the down payment and won't have 2-3K each on top of that to cover the repairs - at least not for a while.

What are our options? Do we walk away? Ask to reduce the sale price? I want the building but don't want to sign up for taking on all these issues without the seller helping out in a fairly significant way. I'd like to think he's a motivated seller but apparently he has his limits.

[Crystal Smith]

If I understand this post correctly, after you purchase this property your LLC will have very little or no reserves left to cover stuff. I'm not talking about the stuff you've listed in the post; I mean the stuff that will come up after you close. If you're paying cash for the duplex maybe the 1st few months rents can be used to build up your reserve. If you haven't paid cash & now have a mortgage, you can still possible set aside the net operating income to build up some reserves.

Bottom line you need to run the numbers and ensure you have a plan to ensure reserves before you make your next move.  If you close & now have zero reserves and something happens @ the property that requires cash well......