Just a few ideas to help you out on this one. First you must realize that the biggest lesson to learn is to know when to say “NO” and walk away. However, there is a couple things you can do to try to get this deal done, and dial it into a profit making business decision.
First thing is to find out area rental averages for like kind income properties.
Second, take the total rents and divide them by .75 and base that figure on your bottom line offer. IF you are not at least a little embarrassed to make an offer, your probably paying too much for it!
You can work on a counter offer and apply a five to ten stratagy. For every five dollars, you go up, be sure the seller comes down ten dollars. And dont force a division of middle ground.
Next, another financing method is to get the seller to carry a 8 percent 2nd mtg. Interest only for 15 yrs. and dial the numbers in that way.
Then go back to the seller and refer him/her to a note buyer to sell the second market. NEgotiate an interest rate reduction with the note buyer you refer to the seller, whereby you can cut another .75% off the balance.
You can also negotiate the seller to carry a 2nd mtg. with staggered balloon payments for reduction of mo. interest rate charges. Ie. if interest only payments are 1200.00 then negotiate a $750.00 mo installment and balloon the ballance at some other time, say five yrs.
Another thing is to try a Lease Option stratagy, where by you have two yrs to exercise, and use a portion of the longer living leases advances, plus a percentage of first months lease payments from tenants, towards paying the initial lease/option payment.
Do upgrades on the building(s) and the landscaping and re-appraise the building for more equity, then reifnance the deal to pay off the underlying loans. Make the 2nd note holder either sell his note, or keep them as a deferment to maintain less than a 95cltv.
Increase rents, on new rental clients. Call a meeting of the tenants and get their feedback. ask them if there was a way to improve the building or services, what whould they like to see? Tell them that by you agreeing to do those improvements, you will need to raise rents by say $20.00 or $50.00 and ask them if that is agreeable to them… If it is that important to them, and will guarantee their renewal, great… if not, dont do the improvements. In most cases, they will be willing to pay more, for you to work on improvements and increasing the value of the property on their backs… Also, if you use this, get them to agree to a new lease, with no qualifying to include the rental increase.
See if those numbers will bring you in line.
GBrents.