I made an offer on a building for 275 000 they, countered at 300 000, I went back with 150 000 at closing 150 000 in 18 months, they comeback with 150 000 at closing and 200 000 in two years . where should I go from here? :help
We need more info! Do you want people on this site to go over your figures and give you advice?
How many units, rents, condition? How will you come up with the balance of the cash? A loan or savings?
It seems to me that your offer–cash now and cash in 18 months was excellent. Looks like the sellers just want an extra $50,000! They already agreed to accept $300,000. So why the sudden $350,000?!
There are some really experienced investors who will advise you if you lay out more information. Let’s hope this is a terrific deal (@ $300,000). You may need to play some hardball here.
Furnishedowner
how are you financing it and does the 25k now make that much of a difference?
what are you buying it for? rental? rehab? ?
thank you for the feed back. The building is 2700 sq. ft. 25yrs old . Cunstruction is cinder block and replacement cost new is $200 sq. ft. without property. The building is in good repair and at good exposure in northern Alberta boom town . A nuclear plant is proposed for the area, The property will be vacant . The town has very low vacancy rate. of buy the way it is presently a restaurant and can be converted to office or retail very easily.
It will be bank financing with 30% down amort over 15 yrs . I think the property has much upside potential and I can easily cash flow it from other propertys until the right tenant comes along. Also can you rite off loss of rental income?
Look at it this way. You are asking the seller to give you an interest free loan for 18 months. If the loan had a fair interest rate, what would be the accrued interest in two years.
For US taxes, you pay taxes on your income. You don’t pay taxes on income you don’t receive. There is no deduction for income you don’t receive.
The seller wants you to give them an additional $50k for a $150k loan in two years. This is a 33% return over the period ($50/$150) or about 16% annualized. With US treasury and money market rates at about, 3.5% and 2%, respectively, I’d bargain hard on this one.
How do you cash flow a property from other properties? Are you saying that this property will lose money due to vacancy but you can afford to make the payments? I guess you’re speculating it will eventually cash flow or otherwise appreciate in value and make up the loss. What if the proposed nuclear power plant project (which can take a decade to build) falls through?
With the office and retail markets as they are, this seems like a big risk. I can’t say I know Alberta however.
Equity,
When you consider the seller is holding a note that will balloon in two years with no payments for 24 months to mitigate risk of default, 16% may not be that bad.
I think you always have to remember that when negotiating there are 5 areas
- Price
- Down Payment
- Seller Financing Amount
- Interest Rate
- Number of Payments
When you do do a deal you may want to input a few of these terms into your note…
Seller shall finance $. 00, at an interest rate of _______ percent. all due and payable in _____ years following the close of escrow date. The first payment shall be due _______ Days following close of escrow and shall continue every _____ month(s), amortized over _____ year(s) until paid in full and according the terms of this paragraphs. Balance to close, (U.S. Cash, certified or cashier’s check) subject to adjustments and prorations: $.00. TOTAL $________.00
Additional terms of the note are as follows;
(i) Borrower will pay a late charge of $15.00 for each and every payment received more than 30 days after it is due.
(ii)Privilege is reserved of prepaying the unpaid principal of this note in full or in part at any time without penalty.
(iii) This note is subject to Section 2966 of Civil Code, which provides that the holder of this Note shall give written notice to the Trustor, or his successor in interest, of prescribed information at least ninety (90) and not more than one hundred fifty (150) days before any balloon payment is due.
(iv) Privilege is reserved and Borrower may, at any time, substitute for the collateral that is security for this NOTE secured by a Deed of Trust. Said collateral shall be of equal or greater value. Value shall be determined by the Borrower. Seller shall execute all documents necessary to substitute collateral upon the request of the Borrower within seven calendar days of request to do so by the Borrower.
(v) Privilege is reserved and Borrower may skip one monthly payment for each twelve (12) month period. The mortgage shall be extended one month for each skipped payment.
(vi)The holder of this note and mortgage is limited to recovery of the debt evidenced hereby by foreclosure and sale of the property affected by the mortgage securing same. The makers/payors shall not be personally liable for any deficiency resulting from any sale and/or foreclosure hereunder.
(vii) If this note is prepaid prior to _______ day of _____________________, 20, then mortgagor shall receive a discount of _________________percent (%) of the remaining balance due.
(viii) Privilege is reserved that Mortgagor shall have the right of first refusal to buy this mortgage under the same terms and conditions that mortgagee herein has agreed to sell this mortgage. Furthermore, this mortgage shall not be sold or assigned without the prior written agreement of the Borrower.
(ix) The subject mortgage is fully assumable upon sale, transfer, or conveyance of the subject property.
(x) The Deed of Trust securing this note shall be subordinate to a subordination agreement which will result in your security interest in the property becoming Subject to and of lower priority than the lien of some other or later security instrument. Subordination agreement shall be recorded and a pre recorded copy of that document is attached as exhibit B.
(xi) Each payment shall be credited first on interest then due and the remainder on principal, and interest shall thereupon cease upon the principal so credited. Should default be made in payment of any installment when due the whole sum of principal and interest shall become immediately due at the option of the holder of this note. Principal and interest payable in lawful money of the United States. If action be instituted on this note I promise to pay such sum as the Court may fix as attorney’s fees. This note is secured by a Deed of Trust to trustee of sellers choice
Good Hunting
Gary
Forget about the plant, until its built it doesn’t exist. Proposed projects are great for selling, rotten for buying.
I’ve dodged the bullet a couple of times for proposed projects, so assume it isn’t going to happen, and if it does it will be 10 years down the road.
Base your price on what is, and remember boom towns can go bust. Don’t pay for hype.