Possible Deal

[Donald M.]

This is a combination real estate analysis/creative financing post.

I saw a property that I am considering making an offer on, but was removed from the market. It had some problems and was listed for a long time, so presumably there was little interest in it.

It is a condominium and located in an area that I would like to move to. My plan is to purchase it, live there for 1-2 years, and rent it out. I summed up monthly expenses based on my ideal price (mortgage, taxes, condo fee, repairs based on actual repair costs for a similar property I have lived in for the past 5 years), and if I were to rent it out immediately I would have a negative cash flow of $200/month, but I don't think I would be paying more than I would to rent a place in the same area, so in a sense I am not losing anything. In the immediate Boston area I think it is impossible to find a place that meets the 50% or 2% rules. My thought is that by purchasing I can fix the monthly costs and that in 2 years I might come closer to breaking even based on increasing rental prices and improvements I would make. I would like to add an in-unit washer/dryer and central A/C (I'm not sure how much it would cost for both of these + installation and did not factor this into the calculations).

In addition it would be ideal to have seller financing because I could not make a 20% downpayment, I would save on closing costs, and perhaps it would make acquiring my next property easier because it wouldn't show up on my credit report? I looked at property records and was able to find the owner name and contact info but there was no mortgage info so I am presuming that it was bought with cash.

My questions are:

1. I found the property myself online, but saw it with a real estate agent when it was listed. Is it okay if I call the seller directly on the phone? If a deal worked out, I would plan on giving a commission to the agent because I think there's a regulation that I have to do this for 6 months after a property is listed.

2. How do I find more info during this phone call and what do I say on the answering machine if no one picks up? I would like to find out if the seller is open to a deal, but the next step is that I would want to see the property another time and perhaps bring a contractor to give some estimates.

3. How do I negotiate both a big discount in the listed price and seller financing? I'm hesitant to offer what the owner previously paid for it which was 10 years ago, but around this price I would still have negative cash flow. Ideally I would seller finance the whole thing but would do with a 20% financing which would cover a downpayment. The main thing I need to find out is how motivated the seller is, because I would not feel bad about getting a great deal if it is a win-win situation. I'm thinking there is nothing to lose by reaching out to the seller and inquiring?