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Updated about 13 years ago on . Most recent reply

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Nathan Emmert
  • Investor
  • San Ramon, CA
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Potential Property - How would you approach it?

Nathan Emmert
  • Investor
  • San Ramon, CA
Posted

So I spoke with a friendly couple this morning about a property they have for sale. They are in their 70s and have 12 other properties and are looking to down size some. Sounds like they actually built this property back in the 80s and it has treated them very well.

Some details:

$4,000 a month in Gross Rents - Tenants pay electric, LL pays Gas.

Taxes and Insurance in my area are low, property appears very well kept, 50% rule is conservative.

They are willing to Owner Finance, he mentioned 20% down and 6% for 20 years. He also said there was $10k of wiggle room in the price maybe.

My situation, I don't have 20% down for him, I have 10%... the property is a very strong deal @ 10% down even at full asking price. How would you approach the negotiation?

Things to be negotiated:
1) Down payment (most important to me because of cash availability)
2) Loan Length (20 years is fair, 30 years is better for a cash flow player but at his age he'll baulk)
3) Interest Rate (6% is fair and .5% either way is only about $50 a month)
4) Price (I'm long term buy and hold and this is priced below FMV so I'm not real worried about a discount beyond asking)

So what would you do? Go see the place obviously to talk face to face. How would you approach the negotiations? Do you go for it all ($10k off, 10% down, 5% Interest for 30 years)... do you work one and offer concessions on others (10% down but I'll pay 7% or 6% for 15 years?)... do you just lay it out that you can only do 10% down and see what he offers?

I'm not going to call back immediately and sound too excited so I figured I'd see if you guys had any tips. I have no experience negotiating face to face with a FSBO and all my negotiating classes seem woefully inadequate at the moment!

Most Popular Reply

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Ibrahim Hughes
  • Real Estate Consultant
  • Bloomfield, NJ
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Ibrahim Hughes
  • Real Estate Consultant
  • Bloomfield, NJ
Replied

I deal primarily with FSBO's. Many older folks are 'old fashioned' and not necessarily business savvy. So trying the new age negotiating tactics might turn the seller off and cost you on this one.

I recall several years ago an older gentleman calling me off of one of my bandit signs looking to sell his vacant lot to me for $45k. Lots at that time were going strong for $80k. Rather than be greedy or slick I asked him (instead of assuming)if the price was negotiable. He stated that the last guy he called tried to counter at $40k and he said he would call him back, thus the call to me. I wisely took that as a 'no', accepted his price and double closed it to a builder at fmv.

If the deal is as strong as you say I would tell the seller "I'll pay your full asking price because I don't want you to think I'm playing games and negotiating back and forth. However, I would like to put 10% down and I can close in x number of days". Say it with confidence (not arrogance) and he'll likely appreciate your honesty and accept your offer.

That's my take with the understanding that others may see it differently.

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