All Forum Posts by: Thomas Corso

correct it’s a note and mortgage.

I understand everything is negotiable. I also understand the sellers attorney is the one to draft the mortgage and note by standard definition.

but is it standard for the buyer to cover that fee then if the seller insist on using only his attorney?

I am finalizing a seller finance deal. 

The seller wants my side to pay for all legal fees such as drafting the mortgage and note. I stated I am more than willing to pay legal fees but i would like to pick the attorney to do so. Seller is asking I must use his attorney even though I am the party paying. 

What are others experiences when dealing with legal fees on seller finance deals. Do I have a right to use my attorney over theirs if I am paying ?

Duplex is in SE Pennsylvania

Asking price - 200k 

Top /bottom duplex- 1 bedroom /2 bedroom

Total monthly profit- 1900

My offer- 206k offer price, 30 year loan with 5 year balloon, 10% down. 

Interest rate - variable 

Months 0-24 @ 4.5 %
months 25-60 @ 6% 

No penalty for prepayment before 5 year balloon.

Monthly loan will be roughly 1300 total PiTi

Cash flow -$600

Thoughts!? This is my first seller finance deal folks, so do not comment if you will bash. I just want to learn and grow and get constructive/helpful feedback.

There is a full reno quadplex for sale that was flipped and marked a duplex. Seller made a blunder and renovated 4 units even though zoning only allows for 2 at this location/property. I checked in with zoning and owner never talked to them and went on their own accord. 

The top units are both very nice and rentable. The bottom units are not rentable though, but could be used as office or storage space perhaps? Trying to Look into rezoning which will be hard to provide hardship since this property is already on their radar from previous owner. 

Looking for advice as I will need to purchase to appeal to zoning board if I even want to pursue rezoning. But figured I can cash flow anyways on the bottom two units if I get creative in the mean time anyway. 

Thanks!

Quote from @Hunter Reed:

Quote from @Jon Q.:

Quote from @Hunter Reed:

Thomas, if you have 10k-20k in cash reserves then $150 cashflow is fine. If you have little to no cash reserves then the investment becomes significantly more risky. As you hold the property the property will appreciate overtime. If you can add value through a rehab this will increase cash flow. Over the years rents have typically increased by 1%-5% each year. Again, if you have solid reserves then you should defiantly pursue this investment.

“The property will appreciate over time”. DO NOT ASSUME THAT, especially in Pennsylvania that have markets that are not fast growing pop or job growth.

😆 Do you understand market cycles and where we are now in the market cycle?  

 Actually, I do understand the market cycle we are currently facing. The housing market is in a correction phase. Holding the property 5-10 years the property will defiantly appreciate in value. As the dollar continues to be inflated prices are bound to go up. Is that true for this year and maybe the next 2 years, no it is not. I would never buy in an area unless I had solid calculations that the property would appreciate in the coming years. 

 Some people act like condescending jerks on here. Like it’s okay to have healthy and professional speculation on tight margins and profits, etc. For anyone to pretend they definitively know “the future market cycle” or how things shape out, is outlandish and full of hubris. 

Quote from @Alan Asriants:

This all depends how much money you are putting into the deal. Seems low from my initial calculation. if youre doing a 0% down VA loan, its not bad since you practically have nothing in the deal.

Calculate your CoC (Cash on cash) return. I typically aim for 12%+. If I really like the property ill go as low as 9%

CoC = (Monthly cashflow after expenses*12 month/total cash invested)*100%

So if all in your investment is 18,000 including down payment and closing costs, your CoC is 10%

$150*12/18,000)*100% = 10%

  with that formula I would be cutting it close 

about 9.5 percent

Quote from @Sarah Ziehr:

Unless this is in a very hot, appreciating area or you plan to live there, I would pass. You cannot guarantee that the property will appreciate, and if value stays the same, everything is going to be old in 10 years and you'll start to have to spend money to update and replace mechanicals. In my market its those renovated properties that are best suited for live in investors who plan to rent out the other unit, reducing their living expenses. 

 It’s a turnkey duplex, everything is new. Obviously not an absolute, but generally speaking I would most likely be good the next 15 years. Of course anybody could say will maybe not , but anybody could say that about any house. And logically speaking, all new appliances, hvac, flooring, etc will be way less risky from a maintenance perspective.

I am in the southeastern PA suburbs which I can imagine is much different than majority of anywhere else in PA. Things are extremely competitive down here and most house still sell for over asking price. 

Quote from @Hunter Reed:

Thomas, if you have 10k-20k in cash reserves then $150 cashflow is fine. If you have little to no cash reserves then the investment becomes significantly more risky. As you hold the property the property will appreciate overtime. If you can add value through a rehab this will increase cash flow. Over the years rents have typically increased by 1%-5% each year. Again, if you have solid reserves then you should defiantly pursue this investment.

Yes I have reserves.. just trying to park some money in the meantime while I continue to look for opportunities. Unfortunately it’s a turnkey duplex with all new everything. So my ability to create more equity with renovations or upgrades is limited. But also the flip side is my overhead for repairs or maintenance is very low as well. I understand such a low cash flow is very unappealing. Wanted to hear others opinions on if they have done the same and in hindsight would recommend or not.

Quote from @Bob Stevens:

Quote from @Thomas Corso:

duplex for 400k price, profit will be $3250 a month, cost $3100 a month. Is $150 cash flow worth it in anyone’s opinion? 

150 a month, you're kidding, right? Why would anyone do that ? Easily can lose money each month, 

Good luck 

I would do it because I’m still gaining 17k a year in equity on principle payoff and safe to say 5% appreciation a year. Which is roughly another 10-20k. I believe those factors play a role.. especially for my 25k sitting in a bank account making nothing.