Partnerships with Sellers

[Tom Horan]

Hey BP - I have a property lead that is a current duplex in the Denver Metro area. The numbers don't look great with an outright purchase at 20+% down. COC, Cash Flow, Down Payment - nothing really looks too great about it. I am looking for thoughts on partnering with the seller on a scrape and triplex build on the property. They owe approximately 130k on their loan and market value is probably 400-425k AS IS. New triplex would be worth 650-700k+ especially with a track record of high rent and low vacancy.

In this area - a new triplex would gross about 6k in monthly rent. Looking for advice on what would make this offer enticing for a seller. Equity share at sale? Cash Flow cut? Has anyone had experience using a seller as a partner? Thanks for your thoughts.

[Jon Holdman]

I'm not sure I have any great suggestions.  That doesn't seem like a good rental, so a rebuild and sell strategy seems more appropriate.  Offering the owner a cut of the profit when you sell is probably the best offer.

But be sure the numbers work.  What will it cost to scrape and build that triplex?  Will you have permitting issues?  Some areas really don't like the scrap-and-build-giant-triplex approach and will fight you.