Rental Property Investor · Augusta, GA · Member since 2017 · 825 posts · 278 votes
Two separate buildings on one property. A nice 2/1 SFH and a 1/1 above the detached garage. Rent has been $700/$400. I think $800/$400 is doable. The owners have had it 14 years, and are looking to "simplify" their lives.
They are asking $125,000, which with a 30 yr mortgage 25% down is a return of 2.5%.
Playing with the numbers,
100k is 6.7%
95k is 7.9%,
93k is 8.4%
When an owner has a property priced like this, how do you approach it? It has been on the market about 5 months. They obviously don't urgently need to sell. What would you do to increase the likelihood they would entertain an offer?
Investor · Warren, OH · Member since 2015 · 168 posts · 188 votes
8y
I would say it is probably just not a deal.
However, if you could offer all cash, wave all contingencies and a quick close they may decide to take a lower offer.
In order for me to get excited I need three things from a seller. Motivation to sell (taxes, inheriting the property etc), close to correct pricing ( if they value the property at 100k more than I do we can’t deal), and a reason that the owner occupant market is uninterested (needs work, to many units). For every one of these that are missing it’s hard to make a deal.
Working with this criteria I would say your suspect property is not a deal. There is little to no motivation. They value the property higher than you do and being a SFH with a mother in law suite the owner occupants will consider bidding on it.
Investor · Warren, OH · Member since 2015 · 168 posts · 188 votes
8y
I would say it is probably just not a deal.
However, if you could offer all cash, wave all contingencies and a quick close they may decide to take a lower offer.
In order for me to get excited I need three things from a seller. Motivation to sell (taxes, inheriting the property etc), close to correct pricing ( if they value the property at 100k more than I do we can’t deal), and a reason that the owner occupant market is uninterested (needs work, to many units). For every one of these that are missing it’s hard to make a deal.
Working with this criteria I would say your suspect property is not a deal. There is little to no motivation. They value the property higher than you do and being a SFH with a mother in law suite the owner occupants will consider bidding on it.
I agree with @Jonathan Holmes. However you can also try to "educate" the seller with real proof, like comparables and other data (in writing.) I submit that info to justify my offer (together with the written contract:) I use this approach with sellers, like your situation, and also banks (REO and short sales.) Some times, it does work.
People react differently when they see something in writing.
You might have to follow up in a few weeks, if the seller is rejecting at first sight. It does take a little bit for reality to sink in. :)
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
8y
Amanda Gust I think the most telling part of what you wrote is “it’s been on the market for 5 months.” Is there some large pending capex item? Is the property in disrepair? Basically, is there are reason they can’t just hold it for another 5 months? If the answer is “no”, well, you’re in for a tough negotiation. That said, try $100K all-cash, waive appraisal contingency, waive an inspection, etc. Basically, take away every possible non-price reason to say “no” to the deal. That’s assuming you’re confident in the property. If you’re not, need deal terms that are favorable to you, and you need a favorable price...and they are getting income from the property. Well, you’ll end up like everyone else that’s made an offer on the property in the last 5 months.
Rental Property Investor · Augusta, GA · Member since 2017 · 825 posts · 278 votes
8y
Thanks, all. I appreciate that I'm not negotiating from a place of strength on this deal. I'm going to try another place where the seller seems more motivated, and maybe come back to this one if that doesn't pan out.
It was very tempting because it is in such darn good shape with well done additions, and so many in my area are not.
Bethesda, MD · Member since 2017 · 7 posts · 3 votes
8y
If it’s been on the market for 5 months why not make the offer you want and see what they say? If they say no then at least you put that number in their mind and when you touch base with them in a couple weeks you may be at a better starting point. Not sure if others would agree