All Forum Posts by: Mariah Jeffery

I just heard from the daughter. Sellers will not go for 5% down; 20% is the lowest they'll go for. However, they proposed a smaller package deal of 8 single family homes with a combined tax assessed value of $473K and total rents of $5,250/month for a price of $375K, financed at 5% interest w/ 20% down, 25 year am. I told her this offer looks good on paper and if due diligence checks out, we'll have a deal.

Thanks everyone for your help! I'd love to own all 52 but I think this is a safer option, and just as good of a deal on a smaller subset. The daughter also mentioned that if things go well and we establish a good payment history, we may be able to talk the parents into a lower down payment on another batch in 6 months. Plus it will give us some practice with the seller financing thing. I'm excited now!

I have 23 units already so it would be a huge increase but better than going from 0.

These properties are all paid off so at least that won't be an issue.

The main reason I want no due on sale clause is because I like this 5% interest rate so much, I'd like to have the option to invest funds received from a sale in other properties, but also the option to pay down the debt as well. Plus, it would complicate things to pay part of the debt off. I'm not sure how the sellers feel about this.

Thanks for the referral to Angelo Russo. I'll contact him and go from there.

I'd like to find a good informative book to educate myself on the subject, even though a lawyer will draw up the paperwork. Does anyone have any recommendations?

I'm about to make an offer on a multiple-property deal with seller financing and I have some questions. I assume if the deal gets accepted, I'll need to get a real estate lawyer but in the mean time, I'm thinking of things I want to include in the terms of my offer. Besides the usual down payment, amortization period, and interest rate, here are some things I've thought of:

- No prepayment penalty
- Seller will report interest as taxable income and issue the appropriate tax forms
- I may try to sneak in no due on sale clause
- Fixed interest rate

What am I missing?

How will I track what's been paid to principle and interest? Is there a software I can buy, or do I simply use Excel's payment functions, and then get the seller to sign off on a statement each year (I know they should be the ones sending me a statement but they're very unsophisticated).

We would probably close on the 44 separate properties in 4 batches of 11 properties. What if I want to sell just 1 out of 11 in a batch?

Thanks!

Jeff, you bring up a good point. I happen to know a little bit about these sellers because they've been my father-in-law's landlord for the last 20 years. There are a few quirks I've picked here:

- They live very cheaply. They obviously are worth millions with these properties being paid off for decades, but drive a beat-up 15 year old truck and eat at McDonald's every day (so I doubt they'd blow $2M in their lifetimes, or even the $100K down payment).
- Their son already has 50+ rentals and daughter has 12, so neither wants any more. The daughter is 64 and is their property manager. She wants to retire at 65 and told them they better have them all sold in a year.
- They HATE to pay taxes. Not that anyone likes to, but they complain about the taxes they had to pay when we bought their other properties every time I talk to them. (This is why I think owner financing would be great - because they wouldn't make a $2M profit in one year).
- They're emotional, and also fickle. They'll be dead set on one thing and there's no changing their minds, and 6 months later they're dead set on the opposite.

Hopefully I can use all of this info in my strategy. And strangely, I'm not even very excited about this deal. I know it could be the deal of a lifetime, but it would also be a lot of hassle and I feel like I could take it or leave it. I think they want to sell to us bad enough that if we don't work something out right away, 6 months later they'll come calling again. In fact, that's what happened with the first property we bought from them, only it was 2 years later.

No mention of purchase price yet. The elderly couple gets overwhelmed easily. I figured it may be better to get them to agree on terms before I get them up with an offer $1M less than they want.

I had a long conversation with the seller's daughter last night. I asked what kinds of terms and conditions they had in mind for the owner financing so we could get on the same page with that before talking price. First she said they wanted 20-25% down. I explained that this wouldn't work and that's the whole reason why going through the bank is not an option. She seemed clueless on the whole credit crunch, so I had to fill her in on that. I explained that to find a buyer who could go through the bank, they would have to find someone with either $600K+ in their bank account, or a lot of equity that they wanted to trade into these properties. And if people 1031 exchange they usually do it into large apartment buildings. She agreed and said she'd talk to the folks about taking 5% down, but mentioned we may have to compromise on that.

Re: interest rates, I didn't go into specifics but I mentioned that we could do something in the middle of what they could expect in CD's (a measly 1.5% if they're lucky) and what I would pay for a mortgage. She agreed with me that this would be a win/win. I consider this a major score because most owner financed deals have a much higher interest rate. I'm guessing they may even be willing to accept 4%.

I also mentioned that I would need the ability to sell and pay off some properties separately, which she was fine with. I said if we work out a deal, we'd probably want to close in batches (i.e., 10 per month for 5 months) so that we don't overwhelm the property management company. She saw no problems with that was well, as long as we were willing to provide an earnest deposit of approximately $20K that we would forfeit if we don't perform on all properties within a specified time frame, possibly the end of '11. This sounds reasonable to me.

I didn't mention balloons, because in all honesty I doubt they've heard of one before and I don't want to plan the idea in their minds.

At this point I'm waiting to hear back if 5% down with a 30 year am. is agreeable to the parents, and will proceed from there.

This is 42 separate lots. Most are single family homes, with a few duplexes. A few are commercial property.

About 20 of the houses are right next to the main street of the city. The land could be worth a lot some day.

There is no debt on any of the properties and hasn't been for decades. They were purchased no later than the 70's. Some were built by the seller in the 40's and 50's.

If there's one thing I've learned about the seller over the years, it's that when something gets stuck in his head, it's hard to get it out. The daughter told me that it's "his dream" to sell all of the properties to a single entity. Sometimes he gets very emotional about these properties, which have been his life's work since he was in his 20's, so nearly 70 years. I think I'll get a much better deal by catering to that emotion.

True, but why would I refi with a 5% interest rate? I would make my offer without any balloon payment involved. I just meant in terms of the seller's acceptance, they're more likely to be enticed by a higher offer price.