Here's the situation. I own a 6 family apartment building which is situated between a 2 family to the right of the house and a 3 family home to the left. The lots are small. I have just 75' of frontage. The problem I have is the driveway to access the parking area in the rear of the house is very narrow ~10feet wide. It's a pain to plow and difficult for tenants to enter and exit. There is a 4' tall chain link fence on the property line which separates my driveway with his. My neighbor (owner) wants to sell his owner occupied 3 family house and move into his own house. He is motivated to sell since he is getting married. He is asking 150k. The last time the house sold was back in 2010 for ~144k.
3 family house in question has its issues(older home, older heating systems probably) but I would like to own it as it would: 1. eliminate my driveway/snowplowing issues 2. add to rental portfolio 3 increase monthly income 4. Both properties are right next door to each other - easier to manage.
Has anyone had a situation like this? If so, what are some tactics I can use to convince the seller to lower his asking price and win him over? The house needs work and at 150k, the house is not worth buying. I would like to be down around $100k to $120k.
Thanks in advance!
the tactic is to offer him what you consider it worth and explain the reasons This will open up the negotiations and maybe a compromise will be made
@Roland Barbeito I would definitely be aggressive and purchase the property as long as the numbers make sense. It could solve your driveway problem but if the numbers don't work, you could put yourself in a negative or very little cash flow situation. Then there's really no benefit. If he's truly motivated and it needs work, I would see what the repair/replacement cost would be, work my cash flow numbers and then offer a fair price.
Howdy @Roland Barbeito
I would analyze your market to determine a good ARV based on recently sold comps. It is extremely important to know what the market is. What are the current rents and what is the market rates? Current income? Projected income? You need to come up with a Rehab Estimate to help justify your lower offer. Keep emotion out of it. Yes, try to help him out. But make a sound business decision.
Thanks for the helpful tips all!
@Roland Barbeito Without knowing the specifics of your deal, have you tried inquiring about owner-financing i.e. where the seller carries the note for you? This will provide him with a steady source of income as he's moving into his new home and provides you with additional flexibility. Furthermore, if the #s make sense, combining the buildings can work wonders in cutting your overall expenses.
Determine how much you want the place. My friend overpaid for the office next to his current office and was thrilled to do so. Perfect solution for him. You do not want the neighbor listing on mls or other network because you have no way of knowing what someone else will pay for the place (of course, it could also work in your favor but that too is a gamble). If he gives you a number that works, and I mean financed in costs you a couple hundred a month (if that is reasonable to solve your problem), then agree. Let the inspection help you get to a more reasonable price...or get you more comfortable with price paid....or use inspection get him to repair/replace obsolete systems. Maybe he will carry a second...loan you the down payment out of his proceeds. Then you would have capitol to do repairs. I understand the place needs work, but he owns the only solution to your problem.
I'd suggest running the numbers as a stand alone opportunity - find that price & offer accordingly.
Additional upside can be found in the areas you mentioned - ease of access, economy of scale with service providers, time efficiency for management, possibly offering additional price points in your portfolio, ...
Contiguous property is worth more to adjacent owners. Just don't pay for it - we make money when we buy.