Urgent insight needed!!

[Waleed Hamdan]

Hey guys,  

Urgent situation need advice!! I have a unique scenario and was hoping to get your insight. I’m hoping this is a situation I can benefit from with a bit of creativity. I’m currently a tenant in a duplex (Bay Area). We just got notice that the landlord is selling the duplex. I wrote him suggesting that we have a conversation about a way I can purchase the duplex prior to listing. I make decent income, but that’s relative (especially in the Bay Area). My question is, what are some scenarios I can present to him that will make it possible for both of us to benefit, making this transaction possible. Here is some information you might want to know. See below:

1. 1-Our rent is $3,500 (should be closer to $3,800) and the second unit is $4,700 (should be 5k)
2. 2-I could come up with 300k down and qualify for 1m loan (prob more considering rental income From second unit
3. 3-I am comfortable paying 5k/month
4. 4-Duplex will be listed for 2.48m for a 1031 exchange 
5. 5-Our neighbor says their side need a lot of work, upwards of 50k (original carpets, stoves, etc. this number is complete estimate)
6. 6-His family is heavy in real estate investment. 
   
7. 6-We’re a family of four (two toddlers) and can move Into the larger unit, but will tough it out and stay in the smaller one to benefit from the higher rental income

They’re coming to take pictures tomorrow so I imagine the landlord will Call me today or tomorrow to discuss. Any insight on a strategy would be deeply appreciated! Please let me know if there is any other information needed to weed out a deal!

Thanks,

Waleed

[Rick Pozos]

If you buy for 2.3mil and put 300k down, that leaves you with a 2mil mortgage. Payment on that 2mil mortgage will be about 12k per month PLUS taxes and insurance. If you do not live there, you will still pay 3k per month NEGATIVE cash flow plus T&I which would come out to about 5k negative and you still have to find a place to live.

[Waleed Hamdan]

Quote from @Waleed Hamdan:

Hey guys,  

Urgent situation need advice!! I have a unique scenario and was hoping to get your insight. I’m hoping this is a situation I can benefit from with a bit of creativity. I’m currently a tenant in a duplex (Bay Area). We just got notice that the landlord is selling the duplex. I wrote him suggesting that we have a conversation about a way I can purchase the duplex prior to listing. I make decent income, but that’s relative (especially in the Bay Area). My question is, what are some scenarios I can present to him that will make it possible for both of us to benefit, making this transaction possible. Here is some information you might want to know. Please keep in mind the purchase price is an assumption based off of the area. See below:

1. 1-Our rent is $3,500 (should be closer to $3,800) and the second unit is $4,700 (should be 5k)
2. 2-I could come up with 300k down and qualify for 1m loan (prob more considering rental income From second unit
3. 3-I am comfortable paying 5k/month
4. 4-Duplex will prob be listed for 1.9m
5. 5-Our neighbor says their side need a lot of work, upwards of 50k (original carpets, stoves, etc. this number is complete estimate)
6. 6-His family is heavy in real estate investment and may not need all the money right away so perhaps this can be a tax benefit play.
7. 6-We’re a family of four (two toddlers) and can move Into the larger unit, but will tough it out and stay in the smaller one to benefit from the higher rental income

They’re coming to take pictures tomorrow so I imagine the landlord will Call me today or tomorrow to discuss. Any insight on a strategy would be deeply appreciated! Please let me know if there is any other information needed to weed out a deal!

Thanks,

Waleed

[Bjorn Ahlblad]

@Waleed Hamdan Study up on 'Seller Finance'. That means the seller carries the note and gets income over time. That will reduce his/her tax burden which is very important especially in California. All the best!

[Chris John]

@Waleed Hamdan

I know that house hacking and California appreciation are all the rage, but I'd urge you to consider your options on this.  You're getting a ridiculous deal on your rent imo.  It sounds like your unit has 43% of the rental value ($3800/$8800).  If you apply that to the $2.5M property it comes out to about $1.075M.  A mortgage for that much (even with $300k down) would be well over $6K I'm guessing with taxes and insurance. 

I'd encourage you to keep renting where you're at and buy elsewhere.  $300k down on a $1M property could get you the $8-9K rent that you'd get from this property and leave you only financing $700K instead of $2.1M.  If you do decide to pursue this building I'd be very careful as it sounds like a lot of leverage ($300k/$2.5M = 12%)

Obviously, you know your situation the best, but it's possible to rent where you live and have the benefits of ownership elsewhere.

Best wishes with whatever you decide!

[Rick Pozos]

If you buy for 2.3mil and put 300k down, that leaves you with a 2mil mortgage. Payment on that 2mil mortgage will be about 12k per month PLUS taxes and insurance. If you do not live there, you will still pay 3k per month NEGATIVE cash flow plus T&I which would come out to about 5k negative and you still have to find a place to live.