15 Overpriced Condos, but Only 10% Down

[Britt Griscom]

We own 16 condos in a complex in Santa Fe, NM. We have the opportunity to buy 15 more using seller financing at 10% down with the rest amortized over 30 years at around 6%. We are negotiating each of these terms.

The 16 that we bought averaged about 36K each. The market has gone up, so they are probably worth 40K now. The seller wants 50K each. But since we would only be putting 10% down, we could make a higher return than if we paid cash to a different seller for one unit, which is the other option we are looking at.

Would you pay over market price if that gave you a higher return? The problem, of course, comes when we try to sell the condos. Then we will take a hit if the market doesn't go up.

Right now they rent out for about $690 per month each, but with about 5k in capital expenditures, we could get at least $725. The seller's terms are much more palatable if I just rent them as is, without fixing them up, at least initially. Then I could fix them up gradually as we save up the money. Is that a good way to think, or should I assume the capital expenditures in contemplating the deal?

Also, we would be borrowing money from relatives and credit card balance transfers to come up with the down payment. The interest rate on these loans would only be 2-3% and we would be able to pay them off in 2-3 years. Do you borrowing the down payment like this is crazy?

Here are some different possibilities:

https://docs.google.com/spreadsheets/d/1dJ_qq9lOho...

Thanks!