Help newbie - take this deal or leave it?

10 Replies

Hello BP members,

 I am a newbie and have found a potential property in Birmingham, AL.  This will be my first if I choose to proceed.   

As far as I can tell the numbers look right from my calucations. Asking price is 33 K. House is presently rented to a section 58 lady so there is a steady check and she faithfully pays the difference of $200. The rent is $700.00. My issue is that the seller (FSBO) wants to sell quick and changed his mind from financing to cash only offer. I do have the funds though this was not my original plan. Looking at other properties this appears to be a great deal. I also like the fact that there is a section 8 renter whom I have met, keeps property in good condition and has no plans of moving soon.

My question is am I putting too much down for a starter.   My thinking is I can utilize the cash out strategy down the road and move on to other properties without being tied down for using a big chunk of my capital.  Thoughts please? Are there factors I am not considering if I go all cash on this deal? 

Hello Katherine.  I'll note two things.  First, why did the seller "all of a sudden" change his mind that he wants an all cash offer.  And did you discuss lowering the price for an all cash offer?  This makes me weary of the seller.  He may be baiting you just to get all cash.  

Secondly, using all cash now depends on your strategy and goals.  I prefer to leverage more because I'm young and hope that I am around for a long time. 

Have you looked into financing this deal?  I imagine if you have the cash for this it shouldn't be difficult to get financing either.

Katherine Theuri I purchased my first property last year for 17k cash. Put 13k in rehab, signed a 2 year lease with a section 8 tenant for 930 a month and did a cash out refinance for 33k with my bank immediately. All they asked for was a copy of my rental agreement and proof of income. I just used that money to purchase my second property for 20k.
Ron, great job for cashing out - what was the apprised value ?
To Chris: just consider alternatives: do you have a deal with 30K down and more than 1000 cash flow ?
If he wants a cash offer only, offer him less money. His terms then it should be your price. Just make sure you have a lender lined up who will give you a loan on a lower priced home like that.
Jane Alstatt It was appraised at 44k

@ Chris Pesternak

Thanks for your response. I appreciate the questions pointers and they actually confirmed my observations. And as for the financing bit of it- yeah he (seller) refused any contigencies, just cash. Yeah he was a very difficult FSBO. Needless to say, I chose to walk away after several negotiations to which he did not budge. For me leverage is the way I am choosing to go and I am still pleased with my decision. I appreciate your input - this being a first offer putting out there.

@ Ron J, Thanks for your input.  Glad to know that there are cash out options that I can utilize in the future.  Best wishes.

This post has been removed.

Darren Budahn, 

Thanks! I did appreciate the "my terms aspect".  Confirmed that I was on track.