Best Approach? Two Condos Via Owner Financing
BP Family! I need your advice on a deal I'm currently working through. General overview, then the question(s):
-Seller outright owns two condos in the same community; no mortgage.
-Tenants in place:
---one has been in place 3 years; always on-time; just went on month-to-month, as he is looking to buy his own house.
---one has been in place about 1 year; just started a new 1 year lease; seller says he is a PITA and it typically late on his rent, but pays the lease-ordered $25/day late fee
-Seller said he wants to enter an owner carry / owner finance scenario, as he wants to spread out his tax liability
Here's where I need your advice:
-Seller paid $150k for both properties four years ago. Complex was built in the mid-80's.
-Units are same sq ftg (approx 500 sq ft), but one is a studio and one is an actual 1 br
-Fully renovated (floor-to-ceiling) units of the same layout and size in the complex are selling today for $155k-$180k (big range, but supply and demand, right?)
-His units are not renovated: original kitchens; original bathrooms; one has some pretty messed up carpet and older vinyl flooring; other unit has 4 year old carpet and tile; new furnaces, A/C units and windows in both units 4 years ago.
-To be competitive in the resale market, both units need: full kitchen and bath remodel; new flooring; new paint; new window fixtures; some / all new internal doors; popcorn ceiling scrape and paint; new light fixtures; likely new water heaters.
My experience tells me that each unit can be fully remodeled for between $20k-$30k.
Seller says that each can be fully renovated and be market-competitive with only $5k. I know that's not the case. I plan to have my contractor provide quotes on both.
So, all that said. We've been going back and forth and have a great rapport. We both agree to the post-renovation value of the units, so we're good there, thankfully. Seller wants:
-$285k for both properties. For simple math, call it $142,500 each. That is VERY close to today's fully renovated resale market, which these are not in that condition, again.
-$150k down, to recoup his initial purchase costs.
-$135k remains:
---$67,500 (half of balance) due December 2019.
---$67,500 (half of balance) due December 2020.
-$0 in between. No monthly payments, interest or other holding costs or fees.
I initially offered him $110k for each unit, given the potential $30k renovation costs. Given his generous terms, I'm considering countering at $245k. This would come down $40k off of his asking price and I would need to count on continued appreciation to ensure a return at the end of the day.
My goal with these units is to keep one as a long-term rental and renovate + sell the other. Maybe keep both as long-term, but for sure one.
Given that bit of information, I'm curious to see what your feedback and / or advice is? WWBPD?!
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***EDIT: I don't have the $150k in-hand. I would have to leverage other assets I have or, preferred, private money.
Thanks!
Chris