Warm my cold feet?

[Ben Bakhshi]

I've been working on a deal to buy a 4-plex for the last 3 months. With numerous bank related issues pushing the calendar date farther and farther.

The deal starting at $182,500. Was negotiated down to $180,000 with the seller paying all closing costs. Eventually, once the property was appraised by my bank, at $140,000, the seller dropped her price to $170,000, closing costs not included.

The seller bought the property at auction for under $80,000 a year ago.
The property is currently generating $2640 a month in income.

I'm pretty happy with the purchase agreements. The bank is lending me $100,000, I have to put $40,000 in with the bank, and $30,000 out of pocket to the seller. Ignoring other fees. I'm using a HELOC to fund all out of pocket expenses, so this is basically no money down. (heloc is prime +1)

Other similar properties are on the market for over $200,000, and are not selling. I think this is due to appraisal values coming in low.

I'll be generating positive cash flow, and yes, the seller will be making a home run in her flip. Took her 1 year to sell, and had a fully occupied building the whole time.

I just wont want to get stuck with a bad deal because I am eager to get the lending closed and see cash flow.

[Jon Klaus]

Ben, I know you are financing the whole purchase between the bank loan and a HELOC. In reality, it's still putting $70k cash down. I think I'd consider another way, though. Since you plan on living in one of the units,, why not get an FHA or FNMA mortgage? The appraisal? Get the seller to come down to appraisal, or get another appraisal. I'd play hard ball with the seller.

It looks like this deal could be done with FHA for 3.5% down. I'd look hard do that and use the HELOC for another deal where cash will get you more of a discount.