First and foremost thank you in advance for any input and sorry for the long post, but I wanted to give all the pertinent information.
I am looking at buying 4 town homes. Each is deeded separately. 2 are 2 bedroom, 2.5 Bath with 1 car garage. 1 is 3 bedroom, 2.5 bath, 2 car garage, 1 is 3 bedrooms, 2.5 bath, 1 car garage.
3 are vacant, the 3 bed, 2 car garage is rented for $1100/month...should easily be $1350...unfortunately it is the electrician whom I've used for 15 years who is renting.
The owner/seller, whom I have known for 20+ years has had an offer of $380,000 for all 4, he countered at $410,000 with another party... Started at $440,000.
He will finance the whole deal, pretty sure with no money down, and we talked a couple of days ago and he said he would beat the heck out of the bank rates, so I am kind of figuring 2%.
The above mentioned electrician said to me the other day that the seller told him $110,000 for his unit. (440,000/4). He has been divorced twice, bankruptcy, bad credit etc. so he told me but that he couldn't get a loan. I don't think he is aware the owner may sell to him on contract. Lets say if he could get a traditional mortgage and had good credit his payment would be $110,000 (I know, no money down, PMI, a mortgage like this doesn't exist, work with me) 4%, 30 years = $525.16 (p/I) + 80 taxes + 50 HOA +50 insurance = $705.16/month.
Here is my plan, I have 2 daughters graduating college in May, one is 19 and one is 23. Each would buy their own 2 bedroom unit. My offer is going to be $390,000 zero down, 2%, 30 years. If he goes for this then effectively each unit is $97,500. If he doesn't and we do $410,000 at 2%, each unit is $102,500.
Here's the rub: I would ask the electrician to move from the 3 bed, 2 car garage, to the 3 bedroom 1 car garage, and offer to sell him that unit for $120,000, which I think the seller would carry the electricians mortgage separate from mine, so it would literally be 4 mortgages, 1 for me, 1 for electrician and 1 each for my daughters. The electricians payment would be $120,000 @2%, 30 years $443.54(P/I) + $80 +$50+$50 = $623.54. Yes he paid $10,000 more for it than he thought, but since the interest rate is 2% he would only pay $623.54/month instead of $705.16/month($110,000 @ 4%). I know for a fact he cannot get the same rates I can from the seller. And on top of that, he would pay less than his current rent of $1100/month.... saving him nearly $500/month and owning it. Plus the price per unit goes down on each unit if all four are purchased together.
Effectively then if purchase price is $410,000 - $120,000(electricians unit) = $290,000 / 3 remaining units = $96,667, but I would structure it more like $102,500 for me and $93,750 for each of my daughters. My plan would be to sell mine outright, a 3 bedroom in the next building sold last year for $134,000 but took 7 months to complete the sale, I would shoot for more like $125,000 sale price, try to get in and out.
My biggest concern is the electrician might think he is getting screwed, when we all know that price doesn't matter if terms are good, but I don't know if he would understand.
My integrity and good name mean everything to me and don't want to screw it up one iota, especially on something that I was actually doing him a favor on. Also, another dilemma is that even if the electrician isn't interested in buying his unit, I am stuck with him as a renter and he is paying $250/month less than market rate so I would have to raise the rent.
The seller bought this building along with some other stuff because previous owner went bankrupt, and trust me, this man doesn't pay too much for anything.
Any input at all is greatly appreciated.
