I am new at this and wanting to make offer on 10 apts. The seller has had them on the market for 10 months. He’s asking 265,000, I asked for disclosures and he sent me rental records for this year and expenses and cost of ins and taxes. He showed me in 4 apts, and said the rest all lookd the same, and some people weren’t home. Was that okay if it were you guys? r they’re any other forms or papers u must see before you buy? Income is supposed to be
3500.00 mth
137.00 mth ins.
294.00 mth txs
300.00 mth trash,water
I want them at 175,000 but not sure how to hardball with negotiations. What are some creative offers you guys would make as I admire so many of your opinions on here.
$175,000 would be a good deal for this deal if you can get it at that, which I’m sure you already know. I would probably make the offer/contract contingent upon seeing the other units. Or you could do something like offer contingent upon inspection of all units resulting in acceptable results to yourself. Make sure and check out the letter of compliance or certificate of occupancy, whatever your local code/law body that handles rentals, to make sure everything is up to date and current. Imagine you bought these and in a month the compliance was up and code came through and made you do $20,000 worth of upgrades to get it up to code.
You say “Income is supposed to be…” Income is whatever the leases say the income is. Make your offer using these numbers. An income producing property is only worth what it’s producing. Unless you’re buying for future rent increases etc…
If you want to offer low be prepared to justify why you offered that price. If he comes back and says, “where the hell are you coming up with this offer,” you’ve got some ammunition to fire back with.
If you’re wanting to get creative with him ask him to participate in the financing and pay him a good rate on his money for doing so. If you get the property at a good price you could make the case that he’s actually getting alot more money because of you’re high interest offer.
Just some ideas, good luck.
ruready,
First, let’s look at this deal:
Gross Rents: $3,500
Operating Expenses: $1,750
NOI: $1,750
Mortgage Payment ($175,000, 30 yr, 7.5%): $1,223 per month
Cash flow: $527 per month or $52 per unit per month, which is too low for me (but may be acceptable for you.
Remember, the 2% rule is just a screening tool. You must still do a cash flow analysis.
I want them at 175,000 but not sure how to hardball with negotiations. What are some creative offers you guys would make as I admire so many of your opinions on here.
The owner basically wants retail for this property at $265,000. There is no secret to hardballing negotiations. Most retail deals can not be turned into a big discount. Either the owner is desperate to sell or he’s not. Make your offer and see what he says. If he says that’s crazy, then fine - move on. Just tell him that if he changes his mind to give you a call. You would be shocked at how many people will change their mind in a month, 6 months, or a year.
Make your offer and then keep looking. There are DESPERATE sellers out there. You’ve just got to do the work to find them.
Good Luck,
Mike
Thanks for all advice. I am not brave enough yet when I go to wanting them to sell me their prop at such a discount. i know I’ll get better but I just need to make more offers low to get used to the responses i’ll get. I’ll let you guys know what he says.
Seriously, it won’t kill you if someone tells you no. What are they going to do to you if they don’t like your offer? Take away your birthday?
Just a suggestion: you waste everybody’s time if you just go around shotgunning lowball offers.
Look for motivated sellers and always have a reason that you have decided upon the figure that you are offering. That makes your offer much more solid and it is going to get more consideration.