Updated over 5 years ago on . Most recent reply
Deal Analysis in Minneapolis Suburb
Good Morning BiggerPockets community,
I got referred to a seller who would like to sell his duplex Contract for deed to help mitigate taxes. I need help figuring out if this is a deal worthwhile and if I should finance the DP somehow. I have never done a Contract for Deed before.. Here are the Details:
Proposed Market Value from seller 295k
Built 1950
Duplex each side 600SQft 2 bed 1 bath
current rent 1100/ unit.
Market Rate 1300/ unit leases expire in 2 months.
Roof updated 2020
Furnace 2017
No A/C
Electrical and plumbing recently updated
Unfinished basement with room to add 1 bed each side with instillation of Egress.
Seller wants 10-15% down and paid full amount over the course of 5 years. (This is proposed in initial conversation with seller, same as proposed price.) ( I am assuming this is a balloon payment)
I currently don't have money for the DP of 10-15% but I have enough cash reserves to acquire this and maintain my other properties.
Property is in sellers market. My duplex (3 streets away) has comps selling for 50k higher than what I purchased mine for 1 year ago.
If anyone is nice enough, can you enlighten me on how I should be looking at this? I have a few more questions getting into specifics:
- Should I be looking at unsecured debt for DP and pay with cashflow after July 31st, should I be looking for a partner on this?
- Would my payments over the next 5 years be very similar to what the current rent is?
- Seller has a total of 11 other doors, should I look for a partner to talk about all of their real estate. Sellers are 70 & 72 and manage all units by themselves but would like to seriously scale back and avoid taxes the best they can.
Any help would be appreciated.
Alex Montoya
Most Popular Reply
https://www.biggerpockets.com/...
Current rent =$1100 x 2 = $2200 Monthly Gross / $295000 Purchase Price = 0.74%. “Market” rent = $1300 x 2 = $2600 / $295,000 = 0.88%. Non starter at that price.