[Marcus Tuttle]

Marcus Tuttle

Hello All,
I found a vacant house 1 block from St. Charles Avenue in New Orleans. The children haven’t done anything with the parents house yet. It is vacant. I found the son and I think that he would sell with owner financing should he get an above market offer.

Fair Market is between $575k and $650k (I haven’t been inside)

My thought is to offer $675000 with $50,000 down (that I would have to find a private lender for and hopefully get an IRA to loan it to me for a payment of $500 per month for some period of time)

Then have a balance of $625000 and ask the seller to accept a $2000 per month payment for 26 years.

Taxes $500 per month Insurance $250 per month for a total obligation of $3250 per month, the $500 per month (for the down payment)would stop at some time in the future.

I think fair market rents would be in the neighborhood of $4500 per month.

My question is: How do you get the $2000 per mo. over 26 years to sound good to a seller (I plan to make no mention of paying an interest rate on the $525,000). Maybe installment sale on an option? Jack talks about payments on an option not being taxable until the option is exercised. I wonder if this could be a benefit to the seller.

Thanks Again
Marcus

[Jackie Lange]

Jackie Lange

Marcus

it would be better to make 2-3 offers and let them pick the one they like the best

all cash low ball offer

then your owner financing at $675 with NO MONEY DOWN and $2k month – explain that you need to use the cash for fix up

then an owner finance for a lower price, like $575K with a small down.

If a higher price is their hot button, they the other offers will make your no money down $2k month offer look really good to them but only if you contrast it with some other offers that are not what they really want.

multiple offers works.

[Marcus Tuttle]

Marcus Tuttle

The email from the seller after presenting 3 offers: 70% of value (cash), 625k for 5years then cash, and 675k no interest 22 1/2 years.

Marcus:

Please help me understand: why would I want to do this with you unless a) the amount you were offering was so much higher than I could get via a broker where we could walk away free and clear of whole thing right away and b) even if it were alot more, if it were spread out over 30 years, unless we were getting a significant rate of interest, the higher amount would be eaten up with the effect of time (inflation, etc..) .c) Lastly, we would be losing the use of our principle where as you would get a house with us financing it. By way of comparison, most financial advisers would say if someone wins the lottery, to take the reduced amount upfront rather than the full amount as an annuity.

Also, how did you come up with value of home? What you are saying seems to be not far off what an agent told me recently she could sell our home for. (Im referring to the $675) And the $470??

Thanks,

[Jackie Lange]

Jackie Lange

Obviously, the broker has not found a buyer but you are ready, willing and able to buy right now. Do they want to wait 1,2,3 years to find a cash buyer?
Good question about how you came up with the number. You need to be able to justify your price with historical data.

If they got the cash and put it in the bank, it would not earn less than 1%
with your offer, he knows the collateral and could earn a higher interest rate.

the note could always be sold later for CASH if they needed it

Email is absolutely NOT the best way to present offers or communicate with a seller. You need to pick up the phone and arrange a face to face meeting. If they are not local, it should at least be done by phone instead of email.

[Marcus Tuttle]

Marcus Tuttle

Great Input! I’ll keep you posted.