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Hello,
I have set a goal to attend David Tilney’s next course in April but I need a deal to pay for it first!
I’ve come across a few opportunities but I need help coming up with offers. I can figure out the cash offer, but I would like to offer terms as well.
Here is the scenario:
House worth $130K. My cash offer $91K
Rentometer says average rent $1363 but I think this could go down so I think that $1200 is better.
Owner is open to terms.
How would you structure terms for this? What other info do I need?
I listened to the call with Richard Kelly (great call) and he mentioned that he always makes 3 offers. 1. Cash at .7 of value, 2. terms of 100 months and 3. terms of 180 months. How would I determine the terms offers? I would always like to be able to exit these deals if I decide not to rent. I could always carryback financing with a wrap if he accepts terms. What am I missing?
Thanks!Kathleen
i need a lot more information to come up with offers.
is there a mortgage on the property? if so, need all details
why is the seller selling? what’s the motivation to sell
sellers are a dime a dozen. unless there is a motivation to sell quickly it is doubtful that the seller would take your below market or terms offer.
for cash offers, it is better to ask the seller what they would take if they got cash in 2 weeks. You should not be the person throwing out a number
how did you come up with your term offers?
need a lot more info before I can help
On this property there is no mortgage. An investor bought it and did absolutely nothing to it for the past few years. Just banked on appreciation.
It is vacant.
I’m not counting on this deal working out- just really wanting to learn how to determine what a good terms deal looks like for me and how to structure multiple offers. How much more would you pay for a house over your cash price if you got the owner to carry back financing? I haven’t structured the terms yet, but based on what Richard Kelly said, I wondered if there was a formula. Maybe there is some training on this that I should listen to.
thanks,
KathleenKathleen,
This is my quick and dirty method to determine what the house can afford to pay as a rental. Take 1/12th of Taxes, and Insurance, Add in 10% for maintenance and repairs, vacancy, and management. Subtract all of these from the monthly rent and you have an idea how much can go towards debt service. This does not factor anything for yourself unless you are doing the management. Also to consider does he need money up front?Jackie is so right you must find out what the persons problem is then try to solve it. You can create and through all kinds of offers at a seller. Unless you truly understand what is going on with their situation, what their motivation is you can not structure meaningful offers.
Don WedeThanks for your reply Don. I really appreciate the input!
This guy bought the house at the steps in 2011 for a song. The house is vacant and is in need of repair- but he has been waiting for the market to change (which it has) and has not really tried to sell it. I was driving by looking for vacant houses and tracked him down. He isn’t really interested in selling- but this is a hypothetical situation and a good exercise for me as I pursue more deals.
In the coaching calls I listened to with Bill Cook and Richard Kelly, they both mentioned that they make multiple offers- one for cash another for terms. Bill Cook even makes offers without speaking to the people- just leaves them on their door. I’m wondering if there is a formula for these terms. How is he able to quickly calculate the terms offer without knowing the motivation of the sellers? Is it a percentage of the rent minus profit at 0% until paid off? These are obviously opening offers- but a starting point non the less. If he seems more interested in one method than another we can go from there.
I’ve emailed Bill Cook and maybe I’ll see him at one of my local Reia’s , but I thought I’d put it out here first.
Thanks again for your help.Kathleen,
Bill is a very experienced high volume buyer. He has many systems in place that he has strategically thought through. Your yet trying to crawl. Bill is like a professional athlete. He is running both a sprint and a marathon. You have to crawl then walk and finally run. Listen to Jackie.’s advice. I am now just reiterating what she as already said. Decide what you need right now to start, chunks of cash or cash flow. If it is chunks of cash do HBS or wholesale deals. If it is cash flow start out with master leases. Once you decide then you have to be committed to study study study the great teaching here on CFD. For someone new it can very overwhelming.It sounds from wanting to attend Davids class that master leasing is one direction already you have decided to go. You need cash to attend. Focus on the training for HBS and wholesale deals to generate the cash to get to his class.
Don WedeKathleen,
If worse comes to worse and you can not close a deal before attending David’s class here is a wild idea.
Go into a little agreement with a financial friend. It can be written or verbal depending on your relationship. I always like things in writing even if the parties are friends or family. Why not structure a deal were you promise to pay out of your first wholesale deal you pay them back. Why not structure a deal that your investor receives half of your net monthly income from your master lease deals until paid in full. You could also give them a return on their investment.
Don WedeHi Kathleen
There is a multiple offer calculator in the premium member section of the File Vault. But there is more to it than making multiple offers.
You need to take in to consideration your exit strategy and objectives for the property.
If you want to just flip the property for a fast profit, your offers would go one way
if you want to keep the property long term, you would make completely different offers.
Assuming that you want to just do a quick flip, it makes absolutely no sense to put up $91,000 to buy the house.
It’s way too risky!I’d need to know what repairs are needed and the estimate of the costs to give better advice
but usually, with a fixer upper, you want to be at not more than 60-65% of After repaired value (ARV) with your offer – for cash
(exit strategy is to wholesale to another investor)You could also offer 75% of ARV if the seller would do 6 month seller financing with one balloon payment. Or you could make monthly payments which are principal only.
(exit strategy is to sell to rehabber with seller financing that wraps the underlying loan- you get down and cash flow with balloon when paid off)See this article about a deal my daughter did for examples
You could also structure an offer to buy with a lease option or a longer term seller financing.
If you wanted to keep the property as a rental, your offers would be different.
Your offers need to match your exit strategy.
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