FSBO duplex - HOW DO I GET IN??

Question

Hello BP world! So I am new to investing. I have gone through a lot of training with the Rich Dad program and I have a mentor in my corner who is very experienced; however, I wanted to start reaching out here to you guys also so I can make MORE CONNECTIONS.

I am going to give my semi-quick story now.  If you don't care, just skip the next paragraph and read my preliminary analysis of the deal that I need help on.

This morning I was searching Duplex FSBO's on Zillow and I found one in Chambersburg that I liked, so I called up the owner. The owner told me that he had already sold that duplex (BOOO!) but he had another he wanted to sell soon anyway (YAAAY!).  So he told me the information and I am going to go take a look at it after I get off work to see what I think.  Here are the stats:

S/S 3/1 (each unit) Duplex in downtown Chambersburg.

Owner has long-term tenants in place who pay $750/mo each ($1500 total/mo.)
Owner has existing mortgage of $90K that he would like paid-off, but isn't desperate, so he's not going to just settle for an offer of $90K. He IS willing to do owner-financing, but it sounds like he much prefers to get his mortgage paid off on this property first versus owner-finance the entire purchase.

What is the best way to get in to this property and make us both happy?  I want as little (or no) traditional financing as possible and I do NOT just have $90K sitting around in the bank (new investor, here). I am hoping for maybe two or three solutions I can provide this guy to make him happy - it sounds like he might have other properties he's going to want to off-load too soon.

What do you guys think????

Ayodeji Kuponiyi · Answer

@Chris Jackson You could find someone to partner up with you to buy and later refinance the duplex or you could convince the owner of using seller financing and assume the mortgage payments. That way, the seller is receiving monthly passive income and doesn't have to worry about the mortgage payments.

IF for some reason you can't make payments, the owner can assume the property again.

Lastly you agree to pay off the owner after a set date once you've accumulated enough funds to purchase. Check this link 1 and search BP for creative financing articles and podcast episodes. Best of luck!

Chris Jackson · Answer

There is a duplex on the market for $65K.  Half is rented and half is  unlivable.  My broker just said that he doesn't do the 203K loans, so he  can't tell me if that is a viable solution or not, but there aren't  really any loans out there that I can get since half of the place is  unlivable.

I don't have the capital to just buy the property outright and as of right now I don't know of any private money sources that could fund the entire purchase price either. What do you guys think?

Chris Jackson · Answer

My mentor who has been doing this for a very long time told me not to call the guy back but let him call me. If he calls, then I'm in the drivers seat and I can make a deal work - if he doesn't call then he's not motivated, and I'll most likely end up wasting my time and efforts trying to make a deal work that he isn't willing to do.  Probably one of the toughest pieces of advice so far - as a newbie, I just want to get something done!  Being motivated but NOT moving on a deal is frustrating.  On the other hand, I updated my profile avatar from this:

To this:

What do y'all think?  haha. I suppose neither is the most professional-looking.  Maybe I should hire a photographer soon...

Chris Jackson · Answer

@Richard Capers Jr - I haven't really crunched numbers yet besides trying to see what some other local rents are.  The owner says he hasn't raised rents in 6 years, but the $750 seems pretty right-on from other places I'm seeing.  I'm going to ask a real estate agent/friend in the local area what she thinks.  The owner already plugged his lawn care guy - but I think if all I am owning is one duplex, I'll probably just manage it myself for the time being until I get a couple more under my belt.  Once I start making some more deals I'll contract out.  (I already have a full-time job!)

Chris Jackson · Answer

Thanks everyone for your replies so far!  To be honest I am a little shocked that I've gotten replies from NYC, Georgia and Illinois - this really seems like a caring community on this site.  I am going to really enjoy picking people brains and learning as much as I can!

MY thoughts are a)to get a quick loan to cash the guy out and the refinance the place at a lower rate; b)offer partial payment now and have him finance as much as he's willing to; or c) write up a lease-option agreement so he'll get an earnest deposit and then while I'm leasing from him part of my payments will go towards the purchase price.

Once again, I'd love just to have him finance the whole deal, but it didn't sound like that was an option he really wanted to hear, and I need to make this a winning situation for him too, not just me.

Richard Capers Jr · Answer

@Chris Jackson

Welcome to BP!  I'm new to investing as well and wanted to see if you ran any numbers in regards to the expenses of the property.  Would you be managing the property yourself or hiring a property manager?  Check out this article:

https://www.biggerpockets.com/renewsblog/2014/12/0...

I don't know how you could approach the seller about financing but be honest with him and see how long he'd be able to carry the sale price.  Hope this helps and feel free to contact me.  I may not know much but I'd be happy to let you know any ideas I come up with.

David Dachtera · Answer

@Chris Jackson,

One way might be to do the owner financing until you can refinance and pay him / his existing mortgage off. That gets you into the deal and buys you time to find other funding, build up cash reserves, etc.

You'll need financing at some level, whether it's a bank, a partner or ...

David J Dachtera

"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."- DJ Benedict

FSBO duplex - HOW DO I GET IN??

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