3 family in NJ – alternative offer advise requested

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  • Hello everyone –
    I am under negotiations and trying to make a deal of the following opportunity.

    Legal 3 family house with current rent rolls (potential 16% increase in rent viable after repairs):
    Unit A: 3b/2ba – $1500
    Unit B: 3b/2ba – $1600
    Unit C: 2b/1ba – $1100
    1 Garage parking – incl. with unit C
    Driveway slot 1 – incl. with unit C
    Driveway slot 2 – incl. with unit B
    Backyard access- incl. with unit C
    Storage in garage – incl. with unit C

    ARV: $500k – $550k
    The property has a mortgage balance.

    Seller(s) are the following parties:
    A. Deed is under: Sister & Spouse who are managing the property
    B. I am negotiating with: Elder Sister & Spouse, whom also has interest in the property.
    C. 3rd party – brother of parties A &B that lives outside the country
    **All parties to approve offer(s) and split sales proceeds evenly

    I drafted the following offer and sent it to Party B, who is representing all parties:

    Buyer to purchase beneficial interest in PROPERTY, for:
    + $45,000 (interest)
    = $495,000, subject to:
    • Transfer of clear and legal title to Party B
    • Inspection
    • Party B to repair/renovate:
    o Three Kitchens and appliances
    o Five Bathrooms and appliances
    o Hardwood floors on all 1st & 2nd floor rooms + stairs + hallways
    o Carpets in basement or suitable replacement
    o Add Tankless Boiler/heater for basement unit
    o Repair, spackle & paint all walls
    o Paint exterior grills
    o Power wash exterior
    o Refinish porch/patios
    o Final repair list TBD after inspection

      Payment terms

    – 10-year interest only balloon note
    • Annual payment of $4500 to Party B OR $375/month.
    • Remaining principal balance due no later than 10 years.

      Party B’s objections:

    1. Transfer of clear & legal title – Party B wants to avoid extra step and extra expense
    2. Monthly payments too low and they were making less than 1% interest at proposed terms
    3. Lack of downpayment

    If title is not transferred to party B….
    How can I ensure that Party A will not file a lawsuit against me since I am making payments to Party B?
    How can I guarantee that party A will continue to make mortgage payments and not have property foreclosed upon?
    How can I guarantee that party A will not take out a 2nd mortgage or HELOC/HEL?

    I’m thinking of going the following route to avoid the uncertainties and get around their objections:

    Three year NNN Master Lease + Option to Buy for $495k
    – I will pay taxes, insurance, maintenance and utilities for common areas (tenants pay all their own utilities)
    -$1000/month with 100% credit towards option strike price
    -Option consideration applicable to strike price 2% of strike price = in lieu of downpayment
    – I will assume the first $200 of repair per unit, and pass that on to tenants.
    **Anything else I’m forgetting?

    Question: How can I make the repairs contingent on the option and option consideration?

    Open to all your suggestions.

    Thank you and have a nice day!

    You said there is a mortgage on the property. What is the mortgage balance and what are the terms?

    I need the mortgage info to craft good offers.

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