A Pair of Duplexes in the Suburbs

[Tom Hertel]

Off market deal, a pair of duplexes in a good school district in the suburbs, asking $779k. 

- Gross rents $79,392 annually

- Expenses: $27,677 (this includes property management, taxes, 5% for repairs, 5% to cap-ex, etc) 

- NOI: $47,755

My question pertains to how to offer on this deal. A full market offer (6% cap) would result in a 7.74% cash on cash return based on 3.5% 5-year, 25-year amor, 75% LTV commercial financing that I've been quoted, which is a lower than my desired threshold. To get closer to my desired 9-10% CoC, I could do one of three things:

- Offer less money, something like $740k puts me right at 9% CoC

- Offer the full amount, but ask for some seller carryback (I've been told some carryback is a option). Something like 10% a carryback at the same 3.5% again puts me right at around 9% CoC

- Go for broke and ask for both a lower price and 10% seller carryback which would get me to an 11% CoC.

Would love to year everyone's thoughts. More about me, I have a a secure job that pays me quite well, so I'm not strapped for cash and expect to have more cash on hand in the future. The carryback is not a necessity to make the deal go through, just a bonus to allow me to put my cash into another property. This would be my first deal, and I think it's a pretty good one, so I don't want to blow it up if I go for Option 3 and offend the seller.