All Forum Posts by: Michael Puckett

Thanks @Brandon Sturgill

I am negotiating seller financing with the seller on a duplex. I know that the seller is all about the interest and wants to retire - he wants to passively collect checks without any management. He has paid the duplex off. He has offered to sell it to me for the exact amount he bought it for $150,000. Value of the duplex is around $160,000.

Would this be a reasonable way to negotiate (or am I completely misunderstanding the concept):

Scenario 1: Seller decides not to budge on the 8% interest rate so I offer to keep the rate at 8% but to purchase the house at $125,000 in order for him to make his interest and keep my monthly payment low enough to have a high cash flow on the property. Meets his needs of collecting a big check on interest in retirement and meets my needs of cash flow. Also gives me a great deal on well kept duplex.

Scenario 2: Seller budges on the interest giving me 6% but keeps the price at $150,000. This keeps my monthly payment equivalent to scenario 1 resulting in high cash flow and keeps his property priced at fair market value.

Which scenario is better? I like scenario 1 where I use the leverage of his desire to retire and keep the interest high resulting in cash flow for me and immediate equity in the duplex. But maybe I am looking at this backwards and thinking of interest all wrong. What do you think? Do you have another negotiating tactic I should try?

By the way I have a relationship with the seller and we are friends. He is on the end of his real estate career while I am trying to get started. He genuinely wants to set me up to succeed.

@Brandon Sturgill thank you! I will push 6%. I know that the seller is all about the interest and wants to retire - he wants to passively collect checks without any management. He has paid the duplex off. He has offered to sell it to me for the exact amount he bought it for $150,000. Value of the duplex is around $160,000. 

Would this be a reasonable way to negotiate (or am I completely misunderstanding the concept): 

Scenario 1: Seller decides not to budge on the 8% interest rate so I offer to keep the rate at 8% but to purchase the house at $125,000 in order for him to make his interest and keep my monthly payment low enough to have a high cash flow on the property. Meets his needs of collecting a big check on interest in retirement and meets my needs of cash flow. Also gives me a great deal on well kept duplex. 

Scenario 2: Seller budges on the interest giving me 6% but keeps the price at $150,000. This keeps my monthly payment equivalent to scenario 1 resulting in high cash flow and keeps his property priced at fair market value. 

Which scenario is better? I like scenario 1 where I use the leverage of his desire to retire and keep the interest high resulting in cash flow for me and immediate equity in the duplex. But maybe I am looking at this backwards and thinking of interest all wrong. What do you think? Do you have another negotiating tactic I should try?

By the way I have a relationship with the seller and we are friends. He is on the end of his real estate career while I am trying to get started. He genuinely wants to set me up to succeed.

I am looking to purchase a duplex. I am pre-approved for a conventional loan by my lender. My original plan was to move into one side of the duplex and rent the other side and rent my current house. By moving in it lessens my out of pocket cash and gives me the ability to own 3 units (2 in the duplex and one being my house). If able to rent the other side of the duplex and my current home I will create a cash flow of $700.00. But the duplex owner has offered me seller financing at 8% interest with a mortgage payment once a month over 30 years. I don't have to pay a down payment and would just need to cover the closing costs. I would be able to stay in my current home and rent both sides creating $500 of cash flow with more cash left in my pocket. I am just starting in Real Estate and my biggest needs are cash in my pocket, cash flow, experience and education. The duplex meets all of my needs and the seller financing gives me more cash in my pocket but less cash flow while the conventional loan sucks up my pocket cash and provides more cash flow. This will be my cornerstone property that will set me up for future buys and I want to make sure that I am in the best position to purchase another multi-family property in the next year or two. What do you guys think? Should I go the conventional loan route or the seller financing?