FIRST TIMER
WE ARE CLOSING ON OUR FIRST DUPLEX NEXT MONTH. WE HAD TO REFI OUR CURRENT HOME TO COME UP WITH THE DP. I HAVE MY EYE ON A SECOND DUPLEX. THE SELLER IS MOTIVATED AND THE TENANTS ARE BOTH SEC 8. THE PROP HAS GOOD CASH FLOW (710 EACH RENT, SELLING PRICE 110000) BUT WE DEPLETED MOST OF OUR CASH RESERVES. ANY SUGGESTIONS ON HOW WE COULD PROCEED WITH NO MONEY DOWN AND SELLER PAYING CLOSING COSTS?
THANKS
Check out John Lock and his Subject to info
I dont think this is a sub-to situation, the person is asking how to get a no money down deal.
The best way to get a no money down deal is to approach the seller and ask what they may be open to? Such questions as "If I could give you a full price offer, would you be willing to cover the closing costs for the purchase" and also inquire if they would be willing to offer financing if you would offer higher than market interest rates.
Asking for both in the same transaction isnt easy. If you have equity in one of your properties you could pledge it against the sellers financing.
One thing to be careful of, over extending yourself just to purchase a property can be a bad choice. I would make sure that if things DIDNT work out, could you make the payments and not default? If you had to carry the payments for say 3-4 months in order to get new tenants or if something came up etc. Think of all the worst case scenarios and make sure you can cover them, and if you can, then go for it!
The liklihood is that if you cannot work it out now, there will be plenty of opportunities in the future (even though it doesnt seem like it right now)
Thanks for the advice.
wallstreet cappers has good advice.
I have bought many by asking the seller to carry on one of my other properties. Your choice how much you ask 10%, 20% or more of the property you are purchasing. Make sure you can carry the Highly Leveraged pptys.
CARLM,
The seller is motivated, yet the property produces a good cash flow, raises a couple of red flags for me. First, what is the condition of the property? Is there a major system that will soon need a very costly replacement (e.g., roof, HVAC) or perhaps a mold problem that will require remediation. In other words, what costly repair problems will you inherit with the property?
Next, what is the seller's motivation? What compelling reason does the seller have for getting rid of an income producing property? If the property is being offered at FMV, the seller is not really motivated to sell -- at least not motivated enough to sell at a discount to FMV.
Is the asking price at FMV, higher, or lower? How did the seller arrive at his asking price?
Finally, how do you know the property will produce a good cash flow? Have you done a cash flow analysis? With $1420 monthly rental income, against $700 in monthly debt service, $200 monthly for taxes and insurance, and $200 a month for maintenance and upkeep, leaves you $160 per month cash flow per unit. Does the landlord provide utilities, trash removal, yard service, and (if so) what is the cost for that? A vacancy or a major repair will chew up several months of cash flow.
It appears that you have some more homework to do here before you can determine that this is a property you want to put in your rental portfolio.
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Thanks for the info. I guess my inexperience is showing. I will probably pass on this property for now and keep my eyes open for something else. I agree with you, there is probably something he is not readily disclosing and I am not going to pursue anything until our other property closes and I am a more seaonsed investor / landlord.
Thanks, and keep up the good feedback!!