how to negotiate/structure this deal

Riverside, CA · Member since 2017 · 412 posts · 296 votes

hey BP

just looking for some advice on a potential deal. I got a call from a yellow letter from a seller. really only motivated because I sent a letter but will sell if "price is right". he left on my vm that he wanted 69k for it. 3/1.. remodeled kitchen and bathroom new carpet and paint. I called him back spoke with him for about 30 mins. he told me has a renter in there bringing in 775/ month and 1431 taxes a year. he wants 69k. I asked how he came up with that number and he said he dad taught him to sell at 100 times the value of the rent. (lol) but he said he knew it wasn't worth that much. its not even worth 69k. I told him recent comps sold for 55-60k. I asked him whats the lowest cash price he could do and he said he would have to talk to his partner. I also asked will he be interested in seller financing. he said he would consider it but would like to be paid in 5 years. he's in his 60's and doesn't want the government to take all his money when he sells lol. he has 8 total properties. my question is what kind of seller finance offer can I make and the structure for it to be a deal if its even a deal. any advice will be appreciated

With the new tax laws the formula changes. Start with telling him you will buy for $55,000 at 5% interest for 30 due in 5 years with zero down. You will take over the maintenance and problems of being a landlord. He gets lower taxes and doesn't have the expense of listing with an agent (usually 6%). If he owns the property outright do owner financing, if he has a small loan do a Wrap. Offer to do this on each of the other properties. There are other questions to ask and considerations regarding entities but this should get the conversation going. Let him counter offer if he chooses, you need to know what he is thinking. It shouldn't be a "take it or leave it" offer but more of a "how do we make this work" type of thing.

2 Reply

Will Kirkendoll

OP

Lorain, OH · Member since 2017 · 111 posts · 53 votes

8y

Originally posted by @Account Closed:

Originally posted by @Will Kirkendoll:

hey BP

just looking for some advice on a potential deal. I got a call from a yellow letter from a seller. really only motivated because I sent a letter but will sell if "price is right". he left on my vm that he wanted 69k for it. 3/1.. remodeled kitchen and bathroom new carpet and paint. I called him back spoke with him for about 30 mins. he told me has a renter in there bringing in 775/ month and 1431 taxes a year. he wants 69k. I asked how he came up with that number and he said he dad taught him to sell at 100 times the value of the rent. (lol) but he said he knew it wasn't worth that much. its not even worth 69k. I told him recent comps sold for 55-60k. I asked him whats the lowest cash price he could do and he said he would have to talk to his partner. I also asked will he be interested in seller financing. he said he would consider it but would like to be paid in 5 years. he's in his 60's and doesn't want the government to take all his money when he sells lol. he has 8 total properties. my question is what kind of seller finance offer can I make and the structure for it to be a deal if its even a deal. any advice will be appreciated

With the new tax laws the formula changes. Start with telling him you will buy for $55,000 at 5% interest for 30 due in 5 years with zero down. You will take over the maintenance and problems of being a landlord. He gets lower taxes and doesn't have the expense of listing with an agent (usually 6%). If he owns the property outright do owner financing, if he has a small loan do a Wrap. Offer to do this on each of the other properties. There are other questions to ask and considerations regarding entities but this should get the conversation going. Let him counter offer if he chooses, you need to know what he is thinking. It shouldn't be a "take it or leave it" offer but more of a "how do we make this work" type of thing.

thanks for the response mike. he does own the house free and clear. what other questions should I be asking him? we didn't talk about the other properties yet. he just said he would sell if price was right.

0 Reply

Account Closed

Riverside, CA · Member since 2017 · 412 posts · 296 votes

8y

Originally posted by @Will Kirkendoll:

Originally posted by @Account Closed:

Originally posted by @Will Kirkendoll:

hey BP

just looking for some advice on a potential deal. I got a call from a yellow letter from a seller. really only motivated because I sent a letter but will sell if "price is right". he left on my vm that he wanted 69k for it. 3/1.. remodeled kitchen and bathroom new carpet and paint. I called him back spoke with him for about 30 mins. he told me has a renter in there bringing in 775/ month and 1431 taxes a year. he wants 69k. I asked how he came up with that number and he said he dad taught him to sell at 100 times the value of the rent. (lol) but he said he knew it wasn't worth that much. its not even worth 69k. I told him recent comps sold for 55-60k. I asked him whats the lowest cash price he could do and he said he would have to talk to his partner. I also asked will he be interested in seller financing. he said he would consider it but would like to be paid in 5 years. he's in his 60's and doesn't want the government to take all his money when he sells lol. he has 8 total properties. my question is what kind of seller finance offer can I make and the structure for it to be a deal if its even a deal. any advice will be appreciated

With the new tax laws the formula changes. Start with telling him you will buy for $55,000 at 5% interest for 30 due in 5 years with zero down. You will take over the maintenance and problems of being a landlord. He gets lower taxes and doesn't have the expense of listing with an agent (usually 6%). If he owns the property outright do owner financing, if he has a small loan do a Wrap. Offer to do this on each of the other properties. There are other questions to ask and considerations regarding entities but this should get the conversation going. Let him counter offer if he chooses, you need to know what he is thinking. It shouldn't be a "take it or leave it" offer but more of a "how do we make this work" type of thing.

thanks for the response mike. he does own the house free and clear. what other questions should I be asking him? we didn't talk about the other properties yet. he just said he would sell if price was right.

I'd start with things like: Are the tenants on a rental agreement? How long have they been there? When does the rental agreement end? Do they pay on time? Have they caused any problems? Do they have any pets that might cause a problem? Did they pay a deposit when they moved in? How much? Why are you selling? What is your goal? When was the roof last replaced? When was the Heat/AC last replaced? When was the kitchen last updated? Who pays for heat, water, electricity (landlord or tenant)? How much are those costs per month? Have all additions/upgrades been permitted? Can I see the rent rolls? Those come to mind.

1 Reply

David Martinez

Rental Property Investor · Port Jervis NY · Member since 2017 · 45 posts · 8 votes

8y

Why don’t you see what he would sell all 8 for as a portfolio. Maybe if he sees the value in selling all 8 at once instead of separately, he would be more likely to lower prices as a package. He gets the time and convenience and you get extra equity.

0 Reply

Will Kirkendoll

OP

Lorain, OH · Member since 2017 · 111 posts · 53 votes

8y

hey guys he texted me last night and said he talked to his partner and they will just hang on with it for now.. I told him to let me know when he's ready to sell

0 Reply

Ray Lai

Investor / Vendor · San Diego, CA · Member since 2016 · 1k+ posts · 949 votes

8y

Originally posted by @Account Closed:

Originally posted by @Will Kirkendoll:

Originally posted by @Account Closed:

Originally posted by @Will Kirkendoll:

hey BP

just looking for some advice on a potential deal. I got a call from a yellow letter from a seller. really only motivated because I sent a letter but will sell if "price is right". he left on my vm that he wanted 69k for it. 3/1.. remodeled kitchen and bathroom new carpet and paint. I called him back spoke with him for about 30 mins. he told me has a renter in there bringing in 775/ month and 1431 taxes a year. he wants 69k. I asked how he came up with that number and he said he dad taught him to sell at 100 times the value of the rent. (lol) but he said he knew it wasn't worth that much. its not even worth 69k. I told him recent comps sold for 55-60k. I asked him whats the lowest cash price he could do and he said he would have to talk to his partner. I also asked will he be interested in seller financing. he said he would consider it but would like to be paid in 5 years. he's in his 60's and doesn't want the government to take all his money when he sells lol. he has 8 total properties. my question is what kind of seller finance offer can I make and the structure for it to be a deal if its even a deal. any advice will be appreciated

With the new tax laws the formula changes. Start with telling him you will buy for $55,000 at 5% interest for 30 due in 5 years with zero down. You will take over the maintenance and problems of being a landlord. He gets lower taxes and doesn't have the expense of listing with an agent (usually 6%). If he owns the property outright do owner financing, if he has a small loan do a Wrap. Offer to do this on each of the other properties. There are other questions to ask and considerations regarding entities but this should get the conversation going. Let him counter offer if he chooses, you need to know what he is thinking. It shouldn't be a "take it or leave it" offer but more of a "how do we make this work" type of thing.

thanks for the response mike. he does own the house free and clear. what other questions should I be asking him? we didn't talk about the other properties yet. he just said he would sell if price was right.

I'd start with things like: Are the tenants on a rental agreement? How long have they been there? When does the rental agreement end? Do they pay on time? Have they caused any problems? Do they have any pets that might cause a problem? Did they pay a deposit when they moved in? How much? Why are you selling? What is your goal? When was the roof last replaced? When was the Heat/AC last replaced? When was the kitchen last updated? Who pays for heat, water, electricity (landlord or tenant)? How much are those costs per month? Have all additions/upgrades been permitted? Can I see the rent rolls? Those come to mind.

These are some solid questions - part of the negotiations you're making is to make sure he understands the hassles he's leaving behind when he takes your offer. That's why asking questions like these that Mike recommended strengthen your negotiating position.

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how to negotiate/structure this deal

how to negotiate/structure this deal

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