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3 duplexes, seller financing, curious on terms
Is it turnkey or does it need repairs? I wouldn’t pay $600k for it unless you can raise rents. Also, you don’t have enough for the down payment. You need to save up more first or see if he will let you buy one duplex at a time as you save up the down payments. You also need cash reserves for capital expenses and vacancy. I also don’t like the balloon pmt option. What happens if the market value drops and you can’t refinance. I would keep negotiating with him. I think at this point you are only able to purchase one of the duplexes and at better price and terms.
#5 Multi-Family and Apartment Investing Contributor
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#5 Multi-Family and Apartment Investing Contributor
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- Shelton, WA
@Jacob George Lada Welcome to BP! If it were me I would not bother going back to re-visit this deal. Spend your time looking for something that makes money and that one will not do that at anything over 400k max. Congrats on saving up the 60k; find yourself a better deal to invest in! All the best.
I would shoot for 125-135 k 20% down at 5% 30 year fixed rate loan, no balloon. depends on hvac, plumbing and roof age. If it is a great property with no capital expenses for a long time that would attract great tenants and has appreciation potential $150k at the most for me. Also is area improving.
Sounds like great properties, just make sure the numbers work. If you do the ballon just make sure you can refinance or he will foreclose on you and get them back. I would do a traditional loan before I did a balloon especially after 5 years. Too risky for me. If I did a balloon it would be a 15 or 20 year balloon.
I currently have 7 rentals in Northern MI and live in Traverse City. Where are these duplexes located in N. Michigan? I ask because 600K could be a great deal or a huge mistake if you are not familiar with the area you are buying in. I know that there are a group of realtors up here that are “breaking up” and selling off their properties. I’ve looked at a few... not good. They are asking way too much. I am willing to give you my honest advice:-)
@Jacob George Lada
Negotiating seller financing is all about knowing what you want and the seller wants and making them think they are getting what they want. For me the most important thing for me is cash on cash return so I focus with as little money down as possible. If the seller is focused on a certain price I give them that price but ask for better terms. If they want a high down payment then I point out a bank will finance repairs so a land contract may not be as beneficial to me as I think and again ask for better terms. This is a general message mainly because you have given general information but build rapport with the seller as much as possible
and make sure they are confident of your execution to pay. We are working on a 2.1 million apartment purchase where seller has already agreed to drop down payment from 20 to 10 percent because they are confident we can run the property better than they ran it. They would not have done this if they perceived our ability to manage as an added risk. Hope the negotiations go well, feel free to reach out with questions. Remember choice of words and presentation matters.
So 72 going towards Glen Arbor or Williamsburg?
Six units in Glen Arbor or Williamsburg sounds high to me unless of course there is water involved. That is a whole different ball game!
Are you familiar at all with Northern MI real estate?
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#1 Foreclosures Contributor
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Outside of Cali, or other really high appreciation potential markets....no way to pay $600k for $4,500/mo in gross rents...close to break even cash flow., with $150k down, 6% interest, 30 years ($2,698/mo).
Well without seeing the property your payment on 600k will have to have a rent increase on all six unit to make it worth your wild.
I just acquired a foreclosed property in TC, 500 ft from one of the inland chain of lakes ( Spider, Arbutus) for a great deal. It’s a total rehab. I plan on doing a summer weekly and winter monthly in it. I think this is one of the most profitable ways to go up here:-)
I also have a LC in Central Lake. It’s walking distance to the upper chain of lakes. I only paid 38k for it. My Amitorzation for 5 years at 7% is $650/month.
I have yet to invest in anything at 600k , but I do study this market and know it very well.
That is a horrible deal. You are negative cash flow and that is without any vacancies, repairs, capital improvements and utilities. You should be positive cash flow $200 a month a door on a duplex so $1800 positive cash flow per month. You will be putting in over $5000 grand a year of your own money to hope for appreciation. I would run as fast as you can.
Well if you can get $1000 per door for rent that changes the numbers and you would cash flow each month. Why is rent only $4300 if fmv is $6000?
So will you kick out the old tenants or can they afford an extra $300 a month? How are you going to pay the mortgage if you kick them out in order to increase rent to what you need? Can you really rent them out for $1k? How many are under a current lease so you can’t raise the tent? You need to answer all these types of questions and come up with a good strategy and make a decision.