Best Approach? Two Condos Via Owner Financing

[Chris Mercer]

BP Family!  I need your advice on a deal I'm currently working through.   General overview, then the question(s):

-Seller outright owns two condos in the same community; no mortgage.

-Tenants in place:

---one has been in place 3 years; always on-time; just went on month-to-month, as he is looking to buy his own house.  

---one has been in place about 1 year; just started a new 1 year lease; seller says he is a PITA and it typically late on his rent, but pays the lease-ordered $25/day late fee

-Seller said he wants to enter an owner carry / owner finance scenario, as he wants to spread out his tax liability

Here's where I need your advice:

-Seller paid $150k for both properties four years ago.  Complex was built in the mid-80's.

-Units are same sq ftg (approx 500 sq ft), but one is a studio and one is an actual 1 br

-Fully renovated (floor-to-ceiling) units of the same layout and size in the complex are selling today for $155k-$180k (big range, but supply and demand, right?)

-His units are not renovated:  original kitchens; original bathrooms; one has some pretty messed up carpet and older vinyl flooring; other unit has 4 year old carpet and tile; new furnaces, A/C units and windows in both units 4 years ago.

-To be competitive in the resale market, both units need:  full kitchen and bath remodel; new flooring; new paint; new window fixtures; some / all new internal doors; popcorn ceiling scrape and paint; new light fixtures; likely new water heaters.

My experience tells me that each unit can be fully remodeled for between $20k-$30k.

Seller says that each can be fully renovated and be market-competitive with only $5k.  I know that's not the case.  I plan to have my contractor provide quotes on both.

So, all that said.  We've been going back and forth and have a great rapport.  We both agree to the post-renovation value of the units, so we're good there, thankfully.  Seller wants:

-$285k for both properties.  For simple math, call it $142,500 each.  That is VERY close to today's fully renovated resale market, which these are not in that condition, again.

-$150k down, to recoup his initial purchase costs.

-$135k remains:

---$67,500 (half of balance) due December 2019.

---$67,500 (half of balance) due December 2020.

-$0 in between.  No monthly payments, interest or other holding costs or fees.

I initially offered him $110k for each unit, given the potential $30k renovation costs.  Given his generous terms, I'm considering countering at $245k.  This would come down $40k off of his asking price and I would need to count on continued appreciation to ensure a return at the end of the day.

My goal with these units is to keep one as a long-term rental and renovate + sell the other.  Maybe keep both as long-term, but for sure one.

Given that bit of information, I'm curious to see what your feedback and / or advice is?  WWBPD?!

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***EDIT:  I don't have the $150k in-hand.  I would have to leverage other assets I have or, preferred, private money.

Thanks!

Chris