Found Motivated Seller That Will Hold Paper, Now What
Thanks to some wise advise from my friends here at TCI i opted out of the last deal i was considering (no cash flow). Now i think i found a keeper and once again would like some opinions. here are the numbers
duplex 3 b/r each side, tenent pays utilities. New burners on boilers.
currently rented for 1100 and 900 + 25/m for garage.
Total monthly 2025
Expenses
vacancy allowance 225/m
prop tax 233
ins 42
water sewer 40
debt 1 890
debt 2 318
total 1748
flow 277/m
tenent pays heat , electric, snow removal, waste removal
one other note. The prop is about 1 mile from local university. It is rented to students with sevurity deposits in escrow. The owner said there is an off campus housing dept in the collage and that when you need to rent they will supply you with multiple choices of students looking for housing.
The asking price is 165,000 and they say they would take back some paper on the deal. They have an opportunity to adopt and need a quick closing. Should also say there is a very similiar prop on the market for 199,000 a few blocks away.
To use the asking price as a starting point
with 10% down either cash or as a second note from the owner
148,500 30yr 6% =890/m debt 1
16500 5yr 6% = 318/m
Would love some input, thanks in advance to all who post
First thing to do is assign the purchase of the property to me.
Just kidding.
How much will the seller's finance?
Shoot for as high as possible.
Are you bank financing the balance?
You are good to go.
Get the contract drawn up and signed, and get it to the bank. They should not care that you have no equity in the property, as long as they do not finance 100%, and they have first lien.
Most banks are picky about investment loans, so shop around for the best price.
I would recommend some, but I don't get a commission. Check out the lenders section of TCI...it is very helpful
dna816,
You are fully amortizing your second mortgage note in five years. I would try for a 30-year amortization with a 5-year balloon -- lowering your monthly debt service on the second to a little less than $100. This should add a little more than $200 to your monthly cash flow.
Before the five year maturity date, you might refinance the property to consolidate both notes into a new mortgage, and reduce your debt service a little more.
Assuming you are going for 80/10/10 financing, you recover your entire 10% downpayment in about 3.5 years from your cash flow.
Just another approach for your consideration.
Thanks for the input,
I was thinking 90/10 with the seller taking back the ten.
Dave, if i understand you correctly I would figure the payments of the 10% down as if it were a 30 year loan but with a balloon payment of the total outstanding principal due to seller in five years ??? Is that what you mean?