Multiple Choice Offer

[Paul Pedro]

Hi, I'm looking at an investment property, an eight unit apartment building to be exact, that is priced at $950k. Based on my cash flow analysis off the income expense statements I've received, I'm evaluating this building at between 1.1 and 1.3 million, so there's a nice piece of equity from the start. Also, based on what I want to offer, the building will positive cash flow with a decent buffer and profit.

The building is being sold through an agent. I dont have a problem with this but I can't use his form to send in the offer I want to make, unless I add it as an amendment, which shouldn't really be that much of a problem. I want to give the seller these options:

A. 950k (full price) with seller financing at 5.5% 30 year note
B. 890k with 690k cash at closing and seller carry 200k 5.5% 30 year
C. 840k cash at closing

Whether the seller will accept or not doesnt matter, I want to make this offer, but I've never seen an example of how this is done. Anyone who has any experience in this, I would greatly appreciate any help or advice. Thanks

[Will Barnard]

Paul, to make such an offer, it is best to send your offer via an LOI (letter of intent). This LOI would spell out each of the 3 options in detail and also all your contingencies you are asking for.

I recommend you include the following at minimum:

This Letter of Intent is subject to the following terms and conditions:
1. Approval of books and records, physical inspection reports, loan documents, rental agreements and service contracts, or any other information requested by Buyer within _______ working days from the receipt of this information by Buyer from the Seller.

2. Buyer to have final approval of any rental agreements, service contracts or leases negotiated during escrow period.

3. Seller warrants that at the close of escrow all heating, cooling, electrical,
appliances, and mechanical apparatus are to be in working order, and the roof (s) to be in good repair and free of any leaks.

4. Buyers rights hereunder may be assigned to the partnership, corporation, or other party, and any such transfer shall have all the benefits and rights that the Buyer has under this agreement.

5. Seller to deliver marketable title and warranty deed at closing, that to the best of Sellers knowledge, no part of the property is in violation of any existing code, health or safety regulations, and is not involved in any governmental or judicial proceedings.

6. Seller is not aware of any structural defect or adverse geological or environmental conditions affecting the property and its value.

7. Evidence of Title is to be in the form of an owners ALTA (American Land Title Association) policy.

8. Upon acceptance of this Letter of intent both parties agree to effect the creation of a mutually agreeable Purchase and Sales Agreement within 10 (Ten) business days.
This LOI is not legal binding.