How Can I Make This Deal Work?!

Question

Hey all,Yesterday I called a couple FSBOs in my small town after doing a little bit of driving around. Two of them called me back so I'll break it down by what they are offering:Caller #1: He is an older investor that is no longer in the area. His mother passed away so he no longer has a desire to come back to my small town. He is selling 3 duplexes and a modular home. Two of the duplexes are traditional 2 story side my sides. The other duplex is a modular home converted into a duplex. The other modular home (that was built in 2003) is where his mother originally lived before she passed away.Duplex 1 (The stucco duplex): Asking 60K and needs a lot of work. (Close to a College)Duplex 2 (The Green Bean): Asking 120K and needs a lot of work as well. (Close to a College)Duplex 3 (Water Street Du): Asking 74.9K and needs minimal work. Is a modular home converted into a duplex.(Not close to a college)Modular home: Asking 84K in good condition with minimal work needed. (Close to a College)Caller #2: This man bought this house a few years ago with the intention of fixing it up. He got too busy building a house on his own land and is now wanting to sell it. He said he's done a little bit of work but not too much. It is a 4bed/2bath and said that it could be turned into a duplex if I wanted to. This house is literally right beside most of the other houses that caller #1 is offering and is close to a college. He is asking 20K which is below market value for the area.Both sellers are willing to do seller financing and are extremely nice to talk to so I'm sure we can work something out. I haven't had a chance to walk through the properties yet, but I will shortly. I just want to see if I even have the ability to make this happen so I don't waste their time.I haven't done any deals yet so this will be my first RE purchase. How can I make this happen. I don't have near enough cash. I only have about 5K right now since I've just started a good full-time job about 5 months ago that isn't seasonal work. Will I need enough cash for the down payment and for repairs? I want more than anything to make this happen, so please tell me what I HAVE to do to make it a reality. I am willing to do whatever it takes!!!Thanks all!

Charlie Fitzgerald · Answer

I doubt you have enough cash on hand to pull either of these off and certainly not both. Seller financing does not mean they are going to hand you the keys to $275,000 worth of real estate for $5000. Additionally, close to a college is good...but is also labor intensive and you will need money to fix things. The first one is probably out of your reach...the second one might be something you can work out if the seller is motivated and kind.

Dakoda Spencer · Answer

Would I be able to find a couple private money lenders to assist on any of these deals? I know I don't have the money to pull this off myself, but I've known that from day one. I just want to know what I have to do to start making deals happen. I'm tired of chasing a "9 to 5" job and I no longer want to make excuses, but to come up with creative solutions. I believe every problem has a solution if I'm willing to find it. For caller #1, I'm sure I could only buy one or two of the properties and work something out on a smaller level. We haven't set any expectations as to what will be done so the door is open for opportunity.I've come to the conclusion that if I want to make any deals happen within the next year, I'm going to have to use creative financing. I ran the numbers on all 5 properties together and this is what I got:Monthly Income: $6,050.00Monthly Expenses: $4,887.45Monthly Cashflow: $1,162.55Pro Forma Cap Rate: 7.28%NOI: $29,862.00Total Cash Needed: $174,000.00Cash on Cash ROI: 8.02%Purchase Cap Rate: 10.74%Down Payment:$31,000.00Loan Amount:$247,000.00Loan Points:$0.00Loan Fees:Amortized Over:30 yearsLoan Interest Rate:5.000%Monthly P&I:$1,325.95I over estimated for repairs and other fees and underestimated cost of rent. Deals like this do not come available in my town very often. I don't want to jump in head over heals and not do my homework, but I also don't want to sit back and watch a good deal go by because I "don't have the money".

Dakoda Spencer · Answer

By "more than anything to make it happen" I mean real estate investing in general. Not this deal in particular. I would love to make this deal happen but only if it's actually a deal. I just want to know what I have to do to figure out what all I need.

Thomas S. · Answer

If they are providing seller financing first find out what they want. There is no way to know what you need to bring to the table until you have their position. If what they want doesn't work for you, like all intelligent investors, you walk away. IT makes no difference what you want and you should never approach any deal wanting "more than anything to make it happen". That attitude is how investors end up making bad deals.Most investors will only close on one out of possibly 50 they look at.