Whats your strategy on negotiating and submitting seller financed offers?
Hi Everyone,
I am getting ready to place offers (letter of intents first) on a 24 unit building I'm looking at. This is a value add deal and is not bank financeable due to condition, mismanagement, and lack of documentation. After dropping the price from $950k it is currently listed at $659k ($27,500 per unit). Seller is open to financing at 35% down, around 7% interest, and flexible term.
After some research, I found that the 10 unit across the street was purchased at $19,000 per door last year by the same seller. This 10 unit property was in similar shape if not a bit better then the one I'm interested in. The buyer also used seller financing. His rate was 5% at a 15 year term (seller wanted to go 25 year term). He put down 50% cash.
I feel the 24 unit is worth $400k which puts it at $16,666 per door. I would like to put down as little as possible to have more reserves and comfort for the big $350k rehab needed.
When talking to the seller, he seems very tired of dealing with it and collecting cash door to door each month. When getting more info out of the listing agent, he says he is flexible but is not willing to "give it away".
I'm looking to hear about what you guys recommend. I would like to know what has worked for you in the past for negotiating and actually submitting the LOI/offer(s). How do you present them? What else do you provide along with your LOIs? What does your LOI consist of? After coming to an agreement with the LOI, what specific terms should I include in the seller financing to ensure I am protected properly?
Thank you in advance and please let me know if I'm leaving other important info out.