Tokyo, WI · Member since 2013 · 38 posts · 3 votes
Last night the appraisal came in ahead of my first deal. The property was valued at $153,000. My offer was $178,000. The 2010 appraised value was $172,000; rent has increased and they've made improvements to the property since then.
The seller is a friend of my mothers. She's been my mentor and was going to be my property management as well.
Is there anyway that I can still make this deal work? I live overseas so maintaining this relationship is especially important to me. Nevertheless, I don't want to start my investing career with a poor buying decision.
I would really appreciate if anyone could steer me in the right direction.
What type of property are you looking to buy and what city is it located in?
If it is a single family and you pay 25k over market value you will have limited exit opportunities available. Also I would think that it would be pretty difficult to earn reasonable return at that price level.
The other item that would concern me is the method you plan on using to purchase the property. A 5/1 arm at 4.75% could be much more expensive when looking to refinance when the term is up.
Property taxes are rather high here as well. Just make sure you work all the numbers out and if the deal makes sense you can move forward with it but if this your first deal and you haven't looked at numerous other opportunities I would hold off.
the 1031 should be no concern of yours and frankly I would be a bit skeptical if someone I knew was willing to sell me a property at 25k over appraisal and then manage it (presumably for $$$) I would definitely wonder if this is first out of area investment in real estate that I would like to make :)
I totally agree " future deal from this person! Or anyone for that matter "
I may overstated this thing about future deals a bit. I have some regular, repeat buyers. I don't have to commit to sell them my next deal. I would never ask them to commit to buy anything from me. But there is definitely some give and take. They might ask for first chance to make an offer on my next deal. Or I need them to pay more on this deal than the last one I sold them. Or I need their crew to paint the exterior of my current rehab next week. Or they ask me to please hire their brother for my next hauling job. Those relationships are built by doing business together and building trust. The OP doesn't appear to be in a relationship that has built up such trust yet.
@Account Closed I see what you are saying. I don't get a sense that there is any consideration for what is best for me as a new investor in this deal. I feel like I'm being pressured to make the deal work and the 2 proposals are really not giving me a good feeling. The level of trust we had is being eroded to way.
I really appreciate your concern and taking the time to write.
In the end, the seller was willing to sell the property at appraised value with no strings attached, but I chose not to make an offer. 100% content with my decision-- felt a big sense of relief.