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

[Graham Nash]

Well they countered my $90K with $111K. It's not what I was hoping for, but I think I'm going to go for it anyway. The numbers aren't great, but it's the relationship with this seller and agent that I'm hoping to cement. 

The seller is an older fella, and turns out he has a few more properties, including an 80K sq ft commercial space that 's fully occupied, and ties to the older investing community around here. 

It might not amount to anything, but if it does, the $11K wont haunt me.