What are your thoughts on this deal?

45 Replies

Hello everyone what are your thoughts on this deal?

Off market duplex for 90k

Seller is a friend who is willing to do seller financing.

50% down(45k cash) with 6% interest for 7 years?

It can easily go for 85k cash.

What are your thoughts and numbers?

Are you unable to get a loan?  You could put way less money down if you got a loan.  Does it need renovation?  Would you cash flow?

I usually try to do seller financing only if it allows me to put less money down.  Otherwise, what's the point?

With unpermitted addition there wont be many buyers .if market purchase rate is 85k and you are gonna pay 90 k for the same with 45k cash down from your own pocket it doesn't make sense to me. you can use that 45k as a 20% down payment for property worth $225 k .unless you are getting it cheap with int rate under 4% and prop value below 80k i might stay away. This is my 2 cent .Good luck

@Delbert Standifer seems like it’s a big win for your friend... gets a wad of cash and gets cash every month for 7 years from you. What’s the upside for you? In my experience sellers want seller financing to avoid capital gains taxes and/or they care more about getting monthly income - not that they want/expect a big down payment from the buyer.

Reach back to your friend with an alternate purchase plan and you need to come up with various option . eg:- All cash 50/60 k ,since you already planning to putdown 45k find the rest of the money via Private lender or from family & friends and close the deal .If your friend is firm on the price perform 1)principal only payment 2.)Interest [Rate under 4.5%]only payment with Balloon at end of 7th year  .Good luck

@Justin Gottuso

I think my friends genuine the duplexes in the south my friend has five other properties on the street. My friend Knows that I need a duplex for my son and I think my friend is just trying to help Sweet deal for my friend and OK deal for me like I said they can easily get 90 K for it especially right now

@Delbert Standifer

I’m with the others. Doesn’t seem like a “no-brainer” purchase. That’s for sure. You could take the $45k and easily buy something worth $180k which, in theory, should have better rents and you’d have a lower interest rate and a longer amortization schedule/term. The more I’m thinking about this, the more I’m thinking you need to ask yourself if this guy is really your “friend”. Seems like a terrible deal. I don’t have all the facts, but you can do a lot better with your $45k.

Might be hard to hear. Maybe post all the numbers: What each side of the duplex rents for

Property Taxes

Insurance

Estimated repairs

What are the details on the promissory note to your friend?

$45k note

7 year term. What’s the am schedule? Is it a balloon payment after 7 years?

So your "friend" with 5 other properties on the street is willing to basically give you a property that generates cash flow each month...?

Also, more details will give us all a better idea of the situation, the property, etc.

Right now, I'd be suspicious as hell. But I don't know your friend or your history with this friend... maybe, he or she is just trying to be generous, knowing your son needs a place to stay...?

you need to slow way down and have a clear picture of what you're getting yourself into. as others had mentioned, why not go the conventional loan route? is your credit score not up to par? your "friend", from the looks of it, is trying to make a buck (a nice one) on you. non-refundable $45k down. he's the only one that stands to profit here. 

Hi, I think that appreciating this is purchase if for a home for a parent and their son as well as an investment is important here.  I consider quality of life as well as what my return is when I am purchasing a property that I might live in now and sell later....I want to be happy in that home while I am living there with my kids, that is first and foremost.  If I can ALSO get a great deal for it, of course I want that too.  So bottom line, I don't think you need to get the deal of the century if you are looking for a home for you and your family to be happy in for the foreseeable future. So if the biggest thing is that  you need a duplex so that you can live in one and your son can live in the other and it is in the area you want to be in a neighborhood you like....those are a lot of things to get right and it seems like you have that with this deal.  

With that being said, I would recommend getting additional local input.  Do the professionals in your area think this is a good deal for you?  Have you spoken to local realtors and lenders and have you driven all the neighborhoods with duplexes that you would want to live in?  Sometimes when something lands in our lap, it seems like the best thing or only thing but it's not.   

Also, like others have said on this thread...how much cash will you need to put into it for repairs or upgrades now?  Having cash on hand for those investments into the property is important.  You don't want to take on credit card debt to make this work. Has your friend and mentor been taking good care of the property?  Is this property and the others they own in good shape and rented to happy tenants?  is there deferred maintenance?  Are you responsible for all repairs in the next 7 years?  Oftentimes, landlords want to sell when the big items start needing to be replaced, roofs, HVAC, sewage lines, electrical/plumbing etc.  These are the things I would consider.  Good luck with it, I hope this all has a happy outcome!

Too much down. Is it a 7 year fully amortized loan or interest only for 7 years. Do I understand you right. You wpould be buying it for $90K but it would sell for $85K? Why would you pay more than the property is worth? What is your purpose for buying the property? Not enough info.

My said they will take all cash for 85k. I really need a duplex for my son because he’s in college and needs a place to live. I figured a paid off property in 7 years is a good deal which can easily cash flow over 1200 month when it’s paid off. That’s why I’m asking BP community but the overall thoughts seems to be it’s not a good deal. The property is in the south.

I think what is most important is your goals/priority.  Everyone has different goals and criteria that drive their investment decisions.  Many folks will say it is all about numbers and nothing else.  I can see that being beneficial, especially in volume situations.  You are mixing personal and business in this transaction so that is more difficult.  I would put it to you like this: Does it as a stand alone investment property(without your son needing a place to live) fit your criteria?  Does it as just a property for your son to live in meet your personal criteria?  If the answer is yes to both, then you likely should pull the trigger.  If the answer is yes to only one, you need to figure out which is more important.  You are the only one on here who can fully evaluate your friend's perspective.  The only thing I would say is how does it compare to a deal not driven by your friend... just to vet the quality of the deal.  Advice is always good, but at the end of the day, your life and your money.  I just laid out how I would vet it.  Good luck.

@Delbert Standifer just my 2 cents. Please don't do it. There really seems like there's little benefit for you for this deal. If you want to buy it just to buy and use it for personal reasons doesn't seem like a bad purchase. But personally I am of the impression $45k can go a lot farther in real estate than one duplex at what I like to think of as a high interest. I personally wouldn't call it an investment. I also own no rent properties at the moment though and put in my first offer in on Saturday.