$8mil MF portfolio, seller finance, what interest rate?

[Kelby Schimming]

BP, 

I am working on a deal in Texas, and I have found an off-market portfolio that the seller is willing to finance. 

I've done some underwriting, but I am caught up on what interest rate to start negotiations with. 

It seems the price is most important to seller, he is motivated to sell, but doesn't have to sell. 

Any suggestions or starting points for interest rate negotiation? 

 I don't want to come in higher than I need to, but also don't want to get laughed at for coming in too low. 

I am also motivated to get the deal.

Any feedback is appreciated. 

Thanks in advance 

[Jacob St. Martin]

Hello Kelby, 

Sounds like a good deal you have here. Here are my thoughts: 

Anyone who has built an $8 million real estate portfolio has some real estate experience and a solid understanding of investment principles. Maybe you can start by looking at the cash flow of this portfolio and working out what rate you would need to get your desired cash on cash return based on the price the seller wants. Then you could go to him and show him the numbers and I think he will most likely think that is reasonable. 

Another point though, it is okay to be laughed at sometimes. If he doesn't want to give you a number to start with then go in and make a lowball one and if he laughs at you then you ask what he would need in order to play ball and now you guys are in negotiations.