The other ROI, Rule of Insult...

[Graham Nash]

BP,

I’m looking at 2 properties that were brought to me by an agent, but aren't on the market. 

Property A) SFR, brick 3B/1.5, 1570 Sqft, tax=$80 per month, insurance $65 per month, rent $875 per month. I would call it a B house, in a solid B neighborhood. Property has tenants and they seemed to be ideal. Place was clean, neat, no bad odors, no junk...

Property B) Duplex, brick 5B/2b, 2054 sqft, tax=$65 per month, insurance=$65 per month, rent $1075 (total for both sides) per month. Again, B property, B neighborhood. One set of tenants were clean and organized, other side could use some help. Not terrible, but I wouldn’t eat with them.

Total, the properties could use about $3-$5K in general repairs, cosmetic, etc…. The owner has held SFR for 4 years, duplex for 35. He's asking $120K for the package.

I own 3 SFR, but have purchased them through a wholeseller (BRRR strategy), with whom I have a solid business relationship. I've used the numbers from those deals, to determine what I should offer this seller. The number I get is $97.5K, so I offered $90K ($30K below asking). The agent said the owner probably wouldn't even counter that. So I didn't break the "rule of insult" with my offer…

Turns out the seller wants to meet tomorrow, and discuss financing. I floated the idea of seller financing at the walkthrough, and it wasn’t shot down. However, the more I thought about it, I’m not too sure about the seller financing option. I think it limits my ability to negotiate. That’s probably from a lack of experience. My original offer was based on conventional financing.

I know there are creative ways to structure a seller financing deal. I just don’t have the experience. That’s what I’m looking for here…Any suggestions?

Thanks,

Graham