Possible OF deal in Charlotte, NC

[Jeshua Patrick]

Hey BP members, I could use some advice on how to approach a potential opportunity that recently presented itself to me. My brother-in-law’s girlfriend’s father owns 5 rental properties in my area (greater Charlotte, NC). I ran into him the other day and asked his thoughts on it and how long he had done it. He said he had had them for 12 years and had done some flips with his brother who has 44 units but no longer flips due to being disabled. He then proceeded to tell me about how awful being a landlord was. He complained about repairs, depreciation recapture, and capital gains taxes. This tells me that he is ready to sell but is afraid of the tax hit if he does. At this moment I have no more deal specifics as that was the extent of the conversation. I need advice in a few areas. 1) Could this be considered not to be an arm’s length deal? If so, any precautions I need to take to ensure I don’t have any blowback if he has a change of heart after the deal is done? 2) I’m assuming this has to be an owner finance deal and would be easier for me if it was. Any suggestions on how to structure it to mitigate and/or spread out his tax liability to make it more appealing to him to sell. Depreciation recapture seemed to be the one thing he was most concerned with. 3) What are your thoughts on coming in at a lower price with a higher interest rate component? Should I offer some sort of prepayment penalty if I refinance or sell before a certain amount of time but don’t have another property available to reassign the remaining portion of the loan to? 4) What is a good set of terms to start at? I was thinking about a 15-20 year amortization with no balloon if possible and interest between 5-8% depending on the price and length of terms. Thanks in advance. Any recommendations for relevant experts in my area would also be appreciated. RE attorney, CPA specializing in RE, experienced investors or groups in my area, etc. FYI, I do have a potential partner who has indicated he would be interested if the deal is right.