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I hope i’m posting this is in the right place…
I’ve been speaking with a seller, who’s wife and brother-in-law own a duplex around the corner from several large employers like an insurance company, state bureau of investigations, etc. It is a nice duplex surround by homes that appear to be in good condition and well kept. One unit is nearly ready to rent the other needs paint carpet and some drywall work. Both units need a water heater, short runs of copper plumbing replaced, and outdoor AC units. I estimate the repair to cost to be, at worst, $15,000. They would only go that high if it were necessary to purchase two new inside/outside AC units. As the property has been vacant for over 2 years, the condition and reliability of the indoor units would be highly suspect. They have agreed to take no less than $30,000 for the duplex, which is valued near $90,000 on the tax website.
They have agreed to carry back a 5 year note at 2.5% interest, with $1,500 cash down, and the first payment of $505.80 not due until December 1, 2011. Tax bill last year was $1,076 and his insurance was around $800, for reference. What do you guys this about this deal? What would be your level of interest in funding the purchase/down payment/rehab costs?
With that much rehab cost, I don’t know that I would want to put anything down. After all, if you default, they will be getting a GREATLY improved property back. What are the market rents? If it is around $700 (close to your PITI payment), it looks like a possibility. Is the area on its way up or down?
Get a contract with a 30 day close. Negotiate that you will get a 20-30% discount if you pay off before 5 years. Include a substitution of collateral clause.
Meanwhile, find an investor who will buy the property with seller financing ( which you will wrap around your underlying loan)
You should be able to sell for $45-50K with $2k-$5k down. charge 8% interest which will give you a very nice monthly cash flow.
You might even charge a prepayment penalty. Let someone else do the rehab and deal with permits from the city. That’s a better deal than they can get with any hard money lender.Or agree to sell for $35,000 with 5% interest if they will split the upside with you.
Lots of ways to make this one work but it is better to CONTROL AND NOT OWN THIS ONE.
Jackie
Sorry, i forgot to include the market rents. The duplex should rent for $500-600 per side, so a total of $1,000 to $1,200 per month income. Each unit is a 2 bedroom and a 2 bath. No permits should be necessary, as we are just repairing various items, no new fixtures.
I like the idea of wrapping the note, seems very Jimmy Napier
I’m assuming that was a typo and you meant that it is better to
CONTROL AND [NOT] OWN THIS ONECorrect?
I thought i would give everyone an update. I sold the duplex on owner financing at $50,000 sale price with $5,000 down, $45k loan at 8% interest ~$427 mo payments plus taxes and insurance and a 15 year amortization. To recap i bought it at $1,500 down, $30k purchase price, 2.5% interest payments of ~327/mo for 8 years. So i net about $3,300 in the down payment, $100/mo for the next 8 years, and 7 years of payments on the back end. Assuming everything works out like i plan, which it will
Thanks for the help Jackie!!!
Thanks Jackie! I’ve been listening to the real estate profit secrets series in the online seminar section so I’ve been trying to build my buyers list and get more wholesale deals. I have about 27 properties i control now in various stages of rent, lease option, and owner finance. But i’m now trying to build up enough cash cushion for my wife and i to go full time. I’m closing on another wholesale that will net about $4k this friday. Thanks for keeping this going. we miss Jack, but he lives on here and with all of you who knew him best.
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