Is This A Bad Idea Or Just Weird
Found a duplex seller looking to get rid of it moving in the next 6 month. Wants 130,000 He has no idea about realestate or what it is worth. Told me it cashflow 1300 a month. 2 units rent 650 he pays heat. Tried to explain that that income was gross but he was just lost. He said he was open to contract for deed. I asked about terms again silence on the other end of the phone. I told him we could talk face to face on Tuesday.
I am going to look at it but was thinking about "subject to" and give him a note for the equity in the property. Or should I give him a low down and take the CD and do a lease option. Any help would be great.
Do you know what it is worth? Is the rent about average for that area?
The price is about right. The rent is high but you can walk to the Mayo Clinc so that is a big bonus. Just like getting some input. Thanks for yours....
Nice to see a fellow Minnesota person up in here. First I know I didn’t talk to the guy but don’t take this the wrong way and I don’t mean to bash you but don’t assume this guy knows nothing about real estate, strangely I seem to make a lot more money when people assume I’m dumb and don’t have a clue.
Without knowing more about this guys situation, I would be careful with a l/o though, if the option is over 5 years, especially if it is undervalued. If he doesn’t truly know the value of the property are you saying he is way under market? Also is the rent close to market? I would be interested to see how this turns out for you.
Scott_MN,
Nice to met you. How about them Viks The prices for duplexes in Rochester have been running about 160 to 170. The rent is a little high but he is paying heat which with the winters could mean the difference between profit and loss. I have to see his records and you are right just because he sounds clueless dosn't mean he is. I have a lot of foot work to do but right now there is no rush.
Little back ground the guy lived there and bought it from previous owner. Fixed up the upstairs ap. Then got married and moved into her house rented it out now is moving and wants to sell it. Will talk at you soon...
Yeah maybe the Viks will actually get beyond the playoffs this year, looks good so far.
Paying for heat might not be a bad idea though, especially with the cutoff rules we have in this state, if the overall building has a control for the heat that would be a good way for the building to keep the costs low.
Are the current tenants section 8?
Do you know what he owes on the property?
He mentioned CD so I figure he is willing to carry back some financing or something creative, something to think about I just closed on a property with me coming in at 65% LTV in new financing and the owner carry back roughly 50K, with interest only payments for 5 years, then lump sum payment for principle. Kind of a good deal will cash flow nicely because negotiated on actual payment and not points so I just sat down and did the calculations looks like the interest I am paying is 2.5%, not bad.
Scott_MN,
Not bad at all. The tenents are not section 8. One med student other a nurse. I had talk to him earlier in the year but he then took the property off the market. When I talked to him before I mentioned CD in passing now he is putting that in his add. I think he is open to anything just wants some cash. I will know more today after we meet. (Loan amount rates etc) Thanks for the help.
Just wondering how long have you been at it and how many properties you own?
Get him to carry as much as he is willing at 4% or less (shoot for 0%). A sophistocated investor (even moderatly so) wouldn't go for it, but this guy might.
I was thinking about 1%over prime (What banks charge each other) Or what a 3 month CD is going for but 0% sounds even better. Thanks for the input. Anyone else?
A friend of mine is fond of saying that we're all "one deal away from being a creep". My opinion is that you offer what's fair in every situation- not taylor an offer to what an individual might "fall for".
I don't like your exit strategies because I haven't heard them yet. I wouldn't go into any deal with just one thing in mind- you need to develop several ways out of this deal. There's so many questions about getting IN, and so much advice about getting IN- well let me just say that getting IN is easy. It's getting OUT that will give you heartburn if you haven't thought it through.
Windy,
Good point. I plan on holding this rental for a while due to the location and the neighborhood. (Walking distance to the Mayo clinic). As for the tricking part you may want to rethink that statement. Offering what is fair is not tricking nor is it creative. Think outside the box. How do you know that I am tricking him? He may be a don't wanter and feel it is fair. He may want to get rid of the managment headache but still have a monthly income. Unless you know the person or the details please do not say we are tricking anyone.
I have thought about how I plan to get out and when but I was looking for ideas on how to get in with little or no money out of my pocket. The goal of ever investor I would hope. Good luck with your investing.
Well I wouldn't say you are tricking him. With my deal I didn't trick the seller or feel like a creep. I created a win-win. I wanted a good price and terms, he wanted to see his full asking price and some cash. I don't think there is a conspiracy to see what this guy might fall for, I am a right and wrong type of guy but fair is kind of subjective. My last 3 deals probably wouldn't seem fair if I explained them until you realize that the true motivation behind the deals was not the numbers, I helped with the situation or fit the needs of the sellers while making a conservative profit for myself the investor.
James question is kind of premature because he doesn't have all the information to make an informed decision as to what to offer, but as far as an exit strategy, kind of hard to develop that if you don't even know if you have a deal or the specifics of the deal and property.
James as far as how long I've been doing REI about a year now. How many properties I own really isn't the right question for me, 3 that would be but how many properties I control is probably the more important question, about 11 now. I am getting about 1-2 deals a month now, interested to see how things go this winter up in this cold state of MN.
[ Edited by scott_mn on Date 10/21/2003 ]
Scott,
Are you doing subject to or a mix of creative ideas. I also have to say WOW 1-2 deals a month that is great. Love to hear that it is being done that way in the great north. I too am a little worried about the winter.
Here is a new question for you. I am from Albert Lea and economy there is in the basement. There is at least 5 to 8 foreclousre listed in the paper a week. (A lot for a town of 18,000). Was wondering if it is worth my time to farm the area maybe subject to some of then and flip them on L/O. I am worried about the high number of foreclosures but also means a target rich enviorment. Thoughts?
Just checking on the post but also wondering about thoughts on area with very high foreclosre is it worth farming. This area is in an economic down turn should I be going after them?
That's a hard question to answer I suppose. For me if the numbers make sense and I am fairly confident I can fill the property then I would move on them.
You do raise an interesting point. I would watch the overall market and business climate. After a year or so of watching the market closely and gaining some contacts you should be able to see the trends and tell which way your local economy is moving.
My key farm area is close to the airport and some major medical/insurance companies. I know that when the airlines or related companies had a layoff recently the motivated sellers actually did spike slightly. Then again now that it appears hiring could pick up things around my local area pick up.
You did say the area is in an economic downturn, is this the truth or just perception. You can find simple stats usually on the county and city level that you can start trending. This might be a perfect time for you to buy or control because the perception is one thing when the actual market and reality could be something entirely different. Usually by the time it hits the news the trend is long in full stride and maybe could be over.
Questions I would ask for a area like yours:
Are more people moving in or more people moving out?
Are businesses moving in or are businesses moving out?
Is there companies that are talking about moving to the area? What impact will that have?
What are the true sales data for homes current, past and where are they going?
You can get a lot of information usually by the business and government leaders. Takes a little time to network but I actually get a lot of good information from my contacts. I intend for REI to be my full time job eventually so I do take the long term approach so I attack REI from that angle. That's one reason why I feel information is the key to feeling comfortable in any investment.
For me I do a mixture of lease option, lease purchase, subject to, and whatever else makes sense. I sit down with a seller and see what their true needs are and offer what I think will work for them and work for me as an investor.
I would say though don't get nailed down on what type of deal you are doing, figure out the motivation and situation of the seller and offer a deal that is a win-win.
[ Edited by scott_mn on Date 10/22/2003 ]
Scott,
Update Looked at duplex his cost are high but got feeling he wants out however he has it listed way too high will have to work on him. To make it work will have to cut the price. I will keep posting.
The Albert Lea area. Biggest employer a factory (Farmland) burned down. job growth is vey slow. So buyer beware?