What do you think about this deal?

[Andrew Graziano]

Hi BP, I'm analyzing a deal right now for a property. It's not exactly an ideal neighborhood, but the numbers seem too good to pass up. I've already been shown the house so I have a decent idea of what the property needs. The deal: Duplex, upper lower in (c- or d neighborhood) $40k Rents at 800 and 775, utilities included. Seller has provided documents showing that he nets $975 a month after utilities, insurance, taxes, etc. Mechanicals look good. It just got some new electrical. Roof is semi recent. No real large expenditures except possibly the detached cinder block garage which might need some maintenance in the future. I offered $36k, 20% down, seller financed the balance at 5% interest, 15 year amortization. He came back with $36k, 25% down, 5% interest, 15 year amortization, 3 year balloon. I got him to push it out to 20 year amortization so the cash flow is a bit better. I could get this property traditionally financed but it would mess with some of my other prospective ventures that I'm working on. The 3 year balloon isn't a problem in my eyes. Do you guys see any problems with this, aside from the neighborhood? I don't see any real opportunity for appreciate in the next 5 years but buffalo is really doing well right now so I could be wrong. Please let me know what you folks think!