hI, am looking at a sfh to purchase as a rental property it is in good shape 2 bdr 1 bath. 0wners are asking 49.5k. They purchased in 93. They had it treated in nov. 05for termites and I spoke with guy that treated. He verified that he treated and there was minimal damage. He has a 5 yr guarentee on his treatment and it will transfer with sale of home. Home will rent for $550-600\mo. I was thinking of making an offer on it but am a little leary with the termite problem. Also, this would be my first time purchasing a sfh for rental. My goal is to hold it long term, and would like to work with owners for financing. Any experienced buyers out there that could give me suggestions on tailoring an offer. I don’t expect you to do it for me but an idea about interest rates that you might request with the offer. I know some people try to do no $ down but I am not sure if I want to go that route or not.

Termites are not that big of a deal. If they have been eliminated and any problems have been corrected I wouldn’t worry about it, or you can always get your own inspection done prior to closing.

As far as owner financing, have they already expressed interest in this? Typically I try to get current market rates but many owners want 2-3% more (also depends on how strong of a buyer you are). I’d start with 5% down, market rate (6% amortized for 30 year) and a balloon after 10 years. This shows them you are trying to be fair and make a good deal for both. When negotiatin the first thing I do is bring the balloon in (to 5-8 years), increase the down payment (to 10-15%) and lastly bring the rate up.

As for price, if they are in no hurry offer close to asking. If they need a fast sale, offer 80-85% and try to get favorable terms first. If you decide to sell in 2 years the main thing that matters is what you owe at that point. Move up on price last, if that is required.

If you try to low ball them from the start they may not want to do business with you. I have bought many properties just by waiting for other investors to piss off the owners after they had seen my offer.

Sean Lewis