Gift horse or too good to be true?

Rehabbing, Fix and Flip, Rental Properties
1

A little help? I am just starting out in building my rental empire. :biggrin I have a gent offering a duplex to me a few thousand below assessed value with 3k down: Turnkey rental minus exterior painting assessed at $1600. I have done business in the past with said gentleman with positive results. He is willing to close immediately with ZERO DOWN owner financed for 2 years amortized at 30. He is requesting the same down payment in 5 months, then having to sell or mortgage in 2 years. Can anyone help with the motivation on why he would offer this? Many thanks and happy new year!

2

I don’t know what assessed value is. What I would do is look at how much he wants to sell it for and how much the property is worth. The property is worth what every other property just like it has sold for in the last 6 months. That is the retail value of the property. Investors pay 20% minimum less than retail as long as it cash flows.

3

Rochester_takeover,

Why not post the gross rents, purchase price, market value, and interest rate and we’ll give you our opinions on this deal.

Mike

4

Valid point…

Rents:$1000
Purchase price:$38,000 $3K down deferred until May. $35K at 8%.

Thanks again

5

Rochester_takeover,

Assuming there is not a lot of deferred maintenance, this is a very good deal. Here is the way I see this deal:

Gross Rents: $1,000
Operating Expenses: $500
NOI: $500

Mortgage Payment ($38K, 30 yr, 8%): $278

Cash flow: $222 per month, or $111 per unit per month

This is a nice deal! Why would he do it? Many people are not suited to dealing with tenants. It is absolutely possible that he had the “tenant from hell” as one of his residents and now he wants out.

Good Luck,

Mike

6

Mike,

  Thanks again. I've dealt with him in the past as well with few roadbumps. It seems I am looking a gift horse in the mouth.

Happy New Year!

Rochester_Takeover

7

what kind of deed are you getting? would their be tax advantages for him to tote the note for you?

8

I’m not sure. I would imagine that could be a factor. I figure if that math works and the property’s not destroyed, his motivation has become obsolete.

9

i would consult your attorney with regards to the type of deed you’re getting and whether or not you truely own the property for the first 2 years.

10

Thanks. I would want the option of reselling at the 2 year point or before. Maybe a lease option?