All Forum Posts by: Todd Magin

I don't see an allowance for capex, which most use at 10%. That would reduce your cash flow to $24. That's way too close for comfort for me, but I'm not in your market.

If your cash available is $120k, then your absolute max purchase price is about $400k. Lenders may balk at that though because there would not be enough cash reserves. I don't know the Boston market, but in the Baltimore market the only 12 units available at that price would land you in class D properties. I'm not personally willing to go there, but if you have experience in those areas and are comfortable with it then it may be possible. Also, class Ds will likely need rehab, so you may need to lower your sights to 2/3/4 plexes.

OK I stand corrected. Cash means cash!! When you see "only cash offers", what does that say about the seller? Are they motivated? Want a quick close? The seller is eliminating most buyers, so they're basically begging for a discounted price?

To me a "cash offer" doesn't necessarily mean all cash, it simply means that I'm waiving the typical financing contingency clause and also not making the seller pay any portion of points towards a mortgage.  It's a move I would consider if my price is low as a way to strengthen my offer and only if I'm very confident in getting financing.

Is this consistent with others views?  If not, please enlighten me.

@Natalie Kolodij

A little out of the box thinking by a newbie, so please shoot me down if need be.

You mentioned that they put it on the market in 2014 and it didn't sell.  Since apples to apples comps are hard to come by, perhaps the prices that similar homes sold for in 2014 could provide some insight.  Compare sale prices from 2014 with similar sales now, and calculate the % of appreciation ... then apply that to their $270K price in 2014.  If nothing else, you could use this as backup material to support your analysis of the comps.

@Vincent Chen

After re-reading your post, I can provide a more generic answer.  If you imagine paying all cash for the property and calculate your cash on cash return (this is the capitalization rate) and if it's more than the interest rate that you'll pay, then the property will be cash positive.   The larger the difference between the cap rate and your interest rate, the better the cash flow and the better your margin of error.

The more you leverage the property (aka with seller financing), the higher the risk that you take during a downturn in the market because your cash flow is less than when not leveraged.

However, if you buy at a deep discount, leveraging is your friend because your risk is already diminished due to the low purchase price.

@Vincent Chen

I think the BP community will need more information as the answer will vary greatly with the deal and the terms.  If you're buying "retail" then the answer may be no because you'll be over-leveraged, but in most cases when you're buying at the right price, seller financing is a good deal, assuming the terms of the loan are reasonable.

Please provide some numbers that we can chew on. :)

Daniel Daniels Correction, go with the lower down payment. You'll put less money in and your payments will be slightly lower too. The only advantage to the 2.5% option is that it is paid off one year earlier. You can use that extra cash for your next deal or for capex.

Daniel Daniels What's the exit strategy on the property? If you want to flip or only hold a couple years go with lower DP. If you're holding the property for a rental, then the lower interest rate will be better.

My last tenant was 30 years ago, so take with a grain of salt. I showed while tenants were still there. I found that my best tenants searched a month or two in advance. People who plan their move are more likely to take care of the property