how to bring a seller down , buy or not ?

Question

ok so, this lady is asking 90, but the house is been on the market for 3 months in a very hot market, but this micro market is not so great bc of the location as being perceived as the ghetto. truthfully its not that bad. and is close to town. 10 min bike ride, the wave of rebuilding is on its way. So I offered 70, she responded with 88. I countered at 83 she pays closing, sellers agent says she probably wont go for it. 3/2 bath mortgage will be about 500. rent for 800 on the safe side. possibility of finishing the basement into studio and renting for another 500. I would be the highest buyer on the street at her asking price, but I can still afford it. looks to me like the best buy under 100,000 in town.

trying to build a portfolio this is number 2. should I loose this deal over 10,000 ? how much should I expect her to drop.

thanks

Brian Hosier · Answer

Hi Nathan Bell, sounds like an interesting opportunity. In my view, you would be overpaying if you go for it at 88 because you would be the highest price on the street. However, the fact that it would still cash flow even without the basement studio is great so if you are a buy and hold investor you would be okay long term. One final thing to consider, if there is a correction coming would you be able to ride out the storm if rents drop? Without having any details of the market you're in, these are my thoughts. Good luck!

Nathan Bell · Answer

brian, thanks, let me respond, to that, I am the highest price on the street but that is mostly in comparison to people who bought the house a couple of years back. i am going for the buy a hold game. if the market did drop, i could use my other rental to help make up the difference or live it. or just make no money on it. I guess buying low end houses is risky if the market does drop becuase poorer people get affected buy this the most. and all the sudden your class C house turns to a class D where as the higher end stuff near never drops that much.

Nathan Bell · Answer

thanks for the tips guys,, I guess I really don't understand the numbers game, i mean you can speculate on numbers but at the end of the day if you don't pay higher than the next guy you don't get the deal. the actual price of anything is what someone is willing to pay for it. Or how do you figure the actually price ? hear is how I see it, people bought houses for way cheaper 3 years ago on the same block. my mortgage would be the same as what i am paying in rent now. it would be my primary home for the next year at least. i don't think I could sell it tomorrow and make a profit so I am banking on appreciation in some regard. it will need some upgrades that i can do over time. but I will do them my self so I can put in some equity. she bought it a couple years ago for 61. I think the space as possibilities, you know its hard to remodel a box, at least this house has options. people always want to be the WINER in a deal , my seller included. both parties have to give.

Miguel Romero · Answer

I am by no means calling you poor. I mentioned it because I used to ask that when purchasing a vehicle, until I heard Dave Ramsey and he made me think things differently.

Miguel Romero · Answer

I am also new to real estate investing but like Donald Trump said, "you must always be willing to walk away from the deal until the very last minute". You said that you would be the highest buyer on the street if you do it at asking price, but that you can afford it. That reminded me of what Dave Ramsey says. He says that broke people always ask "how much is the monthly charge" instead of sticking to their guns and negotiating for the actual prize. He is referring to buying a car but I'm sure it applies to buying a house.

Chris V. · Answer

What I would recommend is to first run your numbers. Then make the decision. Only then bid based on what *you* think its worth based on your numbers. You can even explain these numbers to the seller / selling agent, and ask them where they think you are wrong. Maybe that will help them see your way, or maybe there is something important you missed that they can point out that changes your calculations. If you for example think that based on your numbers it is worth $75K you should not go a dollar over that. Don't look at what you can afford, but look at what you want to get out of the deal and work your numbers from there. BTW I am assuming your operating cost projections include more than just the mortgage?If it is a good deal buy it else, look around some more. Don't make it an emotional decision; leave that for your primary home:)... Good luck on making your decision!