Hello REI
I have a friend that has 2 rental propertys that he don’t want anymore. I would like to take them off his hands. both of them have positive income. the one has a mortgage for $625.00 and is being rented for $985,00. thats $360.00 of positive income. the other has a mortgage of $530.00 and is being rented for $865.00 thats $335.00 in positive income. how can i get a deal dun with out money out of my pocket and not using a bank . he is very motivated. he tells me he’s to old for this anymore. any info is great info. thank you.
Charles
Only you can answer this question.
You need to ask the seller what he wants to accomplish by selling.
“Tired” does not mean walk away with no money, I’m betting.
As far as cash flow is considered, there is none here. After you back out reserves, management, maintenance, (new) taxes, insurance, common utilities, and the rest, you’re going to donate your time and money to these investments for a long time (just like the current owner is doing now).
That’s fine, but don’t expect actual cash flow with these numbers.
The rents are probably lower than they should be. The owner probably stopped raising the rents, in order to avoid turnover. That’s fine, too, but it ruins the ROI. It also provides you with some negotiating ammunition.
Your offer will be based on what the property is doing today, not what it could/might do tomorrow.
Except that… single family properties are not valued on income, but on similar sales.
Meantime, you need to know what the seller’s going to do with his equity.
You need to know how much equity he actually has in the property by first knowing your comps, subtracting any needed repairs/upgrades, and subtracting the current loan balances.
How many years are left on the loans?
The answers to these questions will give you a clue of how to structure your offer.
Then you could just use the old used car dealer method of negotiations, Get your price, or get your terms. It’s one or the other.
It’s unlikely this seller is willing to walk away with no cash. However, he’s more likely to walk away with no cash, if he’s gonna get some in the near future. Meanwhile, you should work to find out what he ‘has to have;’ try to give it to him, and then take everything else.
I could say more, but…
Javipa
I know he’s tired of the calls in the nite. He asked me to make an offer. he will take anything. i think he will just deed the property’s to me. he’s not doing well. i will find out more info tomorrow. i just wanted to get some kind of idea what to offer him. can i do a lease option?
Thank you
You know this situation better than anyone.
If he just wants out, and says “make me an offer” than I would do just that.
I would take time to show the seller what he’d get in a conventional sale using a real estate agent. I’ve got an outline of how this is done in a blog entry called ‘a yellow pad goes a long way’ that may be helpful.
Meantime, I would not do a lease/option unless the seller was willing to sign all the paperwork necessary to close. That way, if he croaks, you don’t have to go to court to finalize the deal.
I would, especially in this case, ask for the deed; take over the existing loans; and create a note for the seller’s equity (if there was any), and call it a day. I would not agree to any early payoffs, or refinancing deadlines.
Hope that helps.
This means that properties containing two or more rental units need to have split utilities; separate furnace, hot water heater, meters, etc. It is much easier and cheaper to purchase an already-split property than to try to do this yourself, so this is an important factor when you are looking at multiple-unit properties. Duplicate systems will mean more maintenance costs over time, however.
Good luck!
Nobody ever sells a business that is making money. They may hire a property manager or they will give it to their kids but they don’t sell them.