How much equity should you consider in obtaining upfront?

3 Replies

Hi there everyone, I'm in the middle of negotiations for my first property. I've analyzed the numbers on this duplex and will be going with an FHA loan at 3.5% down. The property will cash flow about $80 while I'm house hacking but will cash flow $788 when I decide to move and rent both apartments.

The negotiation is at a stand still at the moment since the seller is asking for the maximum comps value in the area. Which in turn I will start off with very little or no extra equity from the buy itself (hope that made since). 

   So in general is it a good deal when starting off with very little equity?

Thank you

@Gilbert Lugo "The deal is at a stand-still because the owner is asking for the highest Comps in the area" It sounds like the seller is testing you, How does this property compare with the properties of higher Comps for the area? Do the comps have high-end finishes and so does the one in negotiations? There are a lot more of these little things you have to look at when a seller is asking for top of the market pricing, sometimes a seller will test a buyer and possibly make some extra money. I'm also assuming this property is 100% Turnkey since the seller wants top market pricing? Lastly the most important part of the deal isn't what the owner wants on the price, it's what is the property worth, and are you willing to overpay to have it?

@Ray Johnson  Compared to its comps this property has 1 less room slightly small square footage. I believe it will appraise for the stand still price. But I’m not too sure about not having more equity even though it will cash flow. 

We are in a sellers market right now. Most sellers are having a pretty easy time getting their price. All trends point to the prices continuing to rise in the near future. Ask yourself this question. Will you be able to reproduce a better deal if you don't close on this one? Afterall, you need to live somewhere.

James Wise, Real Estate Agent in OH (#2015001161)
216-661-6633

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