How to Buy Portfolio

[Abe Imdieke]

Hello Everyone,

I'm putting together an offer to purchase a portfolio of 4 properties from an older investor. He owns the properties outright, has them in one LLC, and is concerned about a hefty tax bill in the year of sale. How can we make this a win-win situation? We've previously done one contract-for-deed deal together.

Any advice is appreciated!

Thanks, Abe

[Charles Carillo]

@Abe Imdieke

You can craft the seller financing over many years. This will break down their annual tax liability. 

I have found that there are 3 main parts to a seller financing deal: down payment, interest rate, and price (4th would be the term). When speaking to the owner (building rapport), your main goal is to figure out which of these main 3 is most important to them. Once you learn this, you can tailor the offer to meet their needs. For example, if they really want $500k for a property, maybe offer a purchase price of $500k but a lower down payment and interest rate (and a longer-term). They are getting what they really want, and you are crafting the deal to where it will still make sense for you.

One potential issue is if what is most important to them is also important to you. For example, if they want a large down payment, and you only have enough for a 5% down payment, that is an issue. Or if they want a high-interest rate, and your numbers will not work at that interest rate, or if they really want a crazy high price where it will be difficult to cash flow and refinance in the future. This is where you need to really start working the numbers, but hopefully, you can craft a deal around what they want.

[Abe Imdieke]

Thanks @Charles Carillo, this is helpful.