Updated about 12 years ago on . Most recent reply
Second possible deal/owner financing/Need help
Hi guys,
I'm new to investing and am currently working on my second deal. The first is a wholesale deal and I'm still waiting on a response from the seller/agent. The second is on a 2 family property that the owner owns free and clear.
She is willing to do owner financing but only wants a 4 year term (planning to move to another state once her husband retires), 4.5 interest rate and 10% down. I believe all of these things can be negotiated down but the main sticking point is the price. She dropped the price (home has been on the market for a hear and a half) from 70k to 53k but is refusing to go any lower (emotional attachment, focused on what she paid and how much she put into it.) The comps in the area are around 45k and the home doesn't need any repairs except for a roof in the next 2-3 years. She's gotten an estimate of $3,500.00 and has agreed to pay half the cost of the roof. Now based on everything that I've learned, I know I should only be willing to pay $70% of the arv however she is willing to take payments of $350.00 per month (taxes and insurance included) and the property is currently rented (1 tenant 3 years and 1 new tenant). It's in a so so neighborhood on a really nice street and currently rents for $950.00 (total, however I believe the rents can be increased at least $50.00 per unit). Considering payments to the owner, estimating vacancy, repairs, and landscaping cost the property should net approximately $330.00 per month.
From what I've read and researched it seems that if the seller gets their price then I get my terms. However, do you all think that the price is ok since it's currently rented and will have immediate cash flow. Also, my thoughts are that if I can't get her to drop the interest rate or price then I shouldn't go through with the deal. Lastly, should the down payment be a sticking point. Please give me your thoughts, I'd greatly appreciate any help you all can offer on rather this is a good deal or not or if there are things that should be done to make it a better deal.
Thank you!