I have an opportunity to purchase 7 properties in a package deal??? The owner is offering seller financing. I asked the realtor what terms the seller was offering on the seller finance. I was told to just make an offer. Here’s the problem, I don’t know what type of offer to make. Should I throw caution to the wind and ask for the works? (ie. 100% seller financing and I take over the debts and the income of the properties). The properties generate almost $5K a month in income. Also, where can I get an example of a proper proposal template?
What you need to do is define the borders of the deal. You need to find out what the deal is valued at retail. You need to determine what is the absolute most you can offer and the deal still makes financial sense. That gives you your ceiling. You then need to look at your target profit margin. If your target is above those 2 numbers then offer a few thousand less. They will accept your offer, reject your offer or counter your offer. If they counter or accept your work begins. That includes terms. Use the price to negotiate for terms and terms to negotiate for price.
Thanks for your response. In determining the retail value of the package, would I take the NOI and multiply that times 10 to find my value. Or should I look at it as more or less individual residential properties?
Just remember always buy wholesale not retail.
If it doesnt work on this one there will be another.
Westdog,
I would strongly suggest not buying anything until you understand WHY you are buying it. The objective is not to simply buy something, but to clearly understand how you will make money. Your post asking how much to offer and how to structure the offer indicate that you don’t have the necessary knowledge.
Good Luck,
Mike
propertymanager is right. I hear people say that they found a property that is a good deal. I ask them why it is a good deal. They start talking about a lot of things. They talk about location, and financing, and crown molding, etc. They rarely say because when I sell it or rent it I will get x amount of profit. It is like saying teachers are underpaid. If I don’t know how much teachers should be paid I don’t know if they are underpaid or not. Figure out how much a deal should yield and then decide what you want to offer.
I want every deal I bid on very badly at my target price. I don’t want it at all for 1 penny more. If I pay more than my target price then it doesn’t satisfy my goal for owing it in the first place which is to yield the dollars of profit I have targeted.
Thank you guys for all your advice. I really took it to heart and considered my options. I have decided against purchasing this deal as we have inspected the properties and found that they really weren’t such a great deal. And just like someone said, there will always be another deal, you were right. We have moved on to something better…where the profit from the deal is so much better rather we decide to buy it and sell it or buy it and rent it. The profit is definitely there.
Thank you again!!!