Offer Countered, advice please!

[Rob Krach]

Hi All,

There is a 6 unit complex that I made an offer on and the owner came back with the below counter as the owners are old and ready to retire:

Purchase Price of 525K

Down Payment of 100K

The Seller would Carry the financing for 2 or 3 years

Fixed $2,250 a month payment to the seller

and a purchase price at the end of 2 years of $371,000 or at the end of 3 years of $344,000.

It is fully rented and updated through the 90's / early 2000's so it isn't in the worst of shape but not the prettiest building in the world.

The Numbers are below:

Rent: $5250

Taxes: $12,000 annually

Insurance is $2400 (this is the quote I was provided)

What is my best approach, I can't afford 100k, I have 10k, do I lock this up after performing due diligence and then wholesale it?

What due diligence do I perform?

What am I forgetting?

Do I go to every single bank Online and Physical in an attempt to get the funds?

Thanks all,

Rob Krach

[Pat G.]

Rob:

I agree with @BrandonHicks. You need to find out where the Sales Price came from, a listing from a broker, a pie in the sky figure, or what it was worth several years ago. 

If you explain your offer to the seller based on numbers, they will either agree and ask for a counter offer based on the numbers, or they will think you are crazy and walk away. If they walk away, that is OK because you didn't get yourself into something that you will stress out about for a long time. Ask me how I know that??!!

We also have not covered the Debt coverage ratio that the banks are going to be looking for of 1.25 when you finally cash the seller out in 3 years down the road. 

Again all these figures or indicators will be shown with a good deal analysis software. It is hard to give you pieces of advice without all the information, but we all tried.