OfflineI responded to a By Owner ad for a 5 unit building (1-1br, 3 -2br, 1 3br) and owner is very motivated due to age. The building is in a downtown area, no yard, has on the street parking. Owner previous rented units weekly from $165-185, he paid utilities about $700-800 monthly. Currently it is vacant and needs roughly 5k to get units ready to rent.
He's agreed to do owner financing. He suggested 6% for 20 years w/15% down, PP of 85k. As we spoke I asked if he would pay for materials and I'll cover labor (husband), he agreed.
So now its my turn to counter and I'm reading Dean's books & members journals fast and furiously to learn negotiation techniques. His terms are good, yet I want great terms !!
I'm a newbie, whose first investment was a tax lien! Any suggestions on terms ?? Or see anything I'm not considering before I counter ??
Thanks in advance.
I think with the numbers you are showing here: at $175 per week times 4 x 5 units =3500 - 700 gas - 450 ins/tax - loan cost $501 = 1,849 cash flow...That's a 26 cap rate (1849 x 12 div by PP = 0.261) I will take deals like this everyday of the week. I would work on the down payment (do you have it or can you find it?). It is a good deal lady.....Just confirm you can get those rents and move on it...
Not having a goal is worse than not setting one..
http://www.deangraziosi.com/real-estate-forums/investing-journals/92139/... -
http://www.deansmedia.com/play.php?vid=266
You may want to increase rents if the area allows. Owner may have not increased them? If you can increase the rents that will increase the value of the property if this is a commercial deal. I would also make the tenants pay for their own utilities if possible. That will increase the $$$ in your pocket.
Why should you pay for something you don't use?? People tend to run up water, and utilities when they don't have to pay for it themselves.(Ex- taking longer showers then necessary, leaving lights on all day..etc)
Commercial properties are valued higher if they are occupied already. So you might also want to have the contract state that you will not start making payments until you have tenants in place.
Hopefully this is helpfull?
You Can Have and Be Anything you Want!!
Jason Bly (The RE_Situation)
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Thank you for your time.
I do have down payment, gonna ask for 5% so I will have $$ for the next deal. Will confirm rents.
Send me your invoice, coach. Thanks again.
Great addition to my offer ... "will not start making payment until tenants in place". Nice!
I've been researching what I can do regarding utilities since there's no individual meters ... seeing what programs the utility companies offer, or what's the expense to separate them.
Appreciate you help.
Ok, thats what I figured on the meters. Thats why he was footing the bill. Yeah contact the utility companies and see if they can put individual meters in. In the long run you will make out. Plus this may increase the value of your building as well.
You can also put in the contract that he installs meters before you purchase it or offer to pay for it 50/50. Theres a bunch of things you can do to be creative.
Good luck!
You Can Have and Be Anything you Want!!
Jason Bly (The RE_Situation)
Visit Me at http://www.facebook.com/JasonBly23
Blog- http://wholesalesuperstar.blogspot.com/
Push Button Yellow Letter Software- http://www.yellowlettergenerator.com
My how to take Discount Vacations Blog- http://www.advisorytravel.net