How Should I Structure This Deal?


I found a two-bedroom condo listed at 180K. I did a preliminary appraisal and the value for those condos are 205k-235k.

However, since we’re in a buy and hold market with values steady dropping, I would like to hold and rent the property. In order for me to achieve comfortable rents/profit, I believe that I should pay no more than 150k.

The seller is willing to subsidize 15k. What is the best way to structure this deal, so that I pay no more than 150k and plus the seller is satisfied?

I wish I had more information about the seller. I believe it will help better answer my question. However, the property is listed through an agent. And you know how that can be.

Thanks in advance


What are market rents in your area for condos of that size?

Hi Rich_in_CT:

Market rents on a 2 bedrooom condo go anywhere from $1300 to $1600/mo.


As a rental that’s a bigtime loser. Your mortgage payment is nearly as much as the incoming rent. Once you add in the condo fee, real world expenses, etc you are bigtime in the red and hemmoraging cash.

Hold on there… not so fast!!!

You’ve done the cash flow analysis on it, right? This deal sounds attractive at a 73% LTV. Are you mortgaging the purchase or paying cash? If the seller carries back a second, make sure your lender’s program can allow the higher CLTV. You must know this. If you offered a 2nd mortgage at 8% to 10% with a 5year balloon, I would think that might be attractive. Hell, as long as this cash flows, offer a higher rate. What does it matter? At this LTV, you could refi and pay him off quickly. Are you going to have any of your own money in the deal? How confident are you the seller will take $150K? That’s quite a discount. How many days on the market are we? You didn’t figure your desired profit and back into an offer price did you? Why aren’t you working with an agent that can present this deal? You may be surprised to find out that you’re giving the listing agent a bigger pay day. One final thought. If I was the listing agent and this offer showed up, my seller would have to be desperate to take it. First you ask us to discount the price 17% when FMV is at 203K, then want us to carry back a second. I’d be wondering how serious you were. Probably wouldn’t counter. Now, I’ve said this without the benefit of knowing the seller’s situation. If I’m way off base, I apologize. When I’ve structured offers like this, I’ve been much closer to asking price. I do hope it works out for you. Remember, the numbers don’t lie.



My cash flow analysis showed that I would barely break even on this deal. However, I think it would be a pretty good investment over the long run. I’ve owned properties in that area before and they cashed in during the realestate boom.

I know that my offer was a little low ball, and I’m not sure how desparate the seller is. However, at 150K I would barely break even. So I thought, what the hell. They can only say NO :biggrin

It’s all water under the bridge now though. My realtor said it went under contract already. I was dealing with a realtor that works an hour from the property and it was difficult getting them out right away (live and learn). I deal with several realtors and figured I owed this one this deal, instead of dealing with the one in the area (Loyalty will kill you quicker than a bullet :beer)