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Jackie,
I just put the townhouse I was talking about under contract with the seller. He wants $97,500 for a townhouse with comps in the $40,000’s. The same agent who has had it listed for the past two years, was willing to let it continue to sit at $110,000.
I offered $150/month to the seller, which directly goes towards paying off the sale price of $97,500. When the market recovers enough for an occupant buyer to pay enough to cover the $97,500 and my desired profit, I will sell and pay off the owner. (Which means the townhouse won’t sell for a long, long, long time).
I told the owner, “Your agent is willing to let this townhouse sit on the market until you can get at least $97,500 for it, and have you shell out $250/month in taxes, insurance, and utilities. I’m perfectly capable of getting you that same price when the market turns around, and pay you $150/month towards the purchase price. Isn’t that like I’m paying you $400/month?”
Well, he took it, and we’re going to close as soon as possible. So, I’m getting:
– a townhouse in absolutely pristine condition, that will rent for $825/mo, and I only have to pay $150/month towards principal
– zero interest loan
– low expenses on the HOA (this particular neighborhood is structured such that the HOA is $50/year)
– the best school district in a highly desired county
– no downpayment, just closing costs and real estate agent commission, totalling about $4,500 (I want to puke at the idea of paying that agent anything – she even advised him not to do this deal….why? So the property can sit for even longer at an unrealistic price????? But I did promise no cash out of pocket at closing)
– after taxes, insurance, 10% vacancy, 10% repairs, and HOA fees, $365/month income (97% annual return if I manage the property)I truly believe this may be my best deal ever
HI Chris
CONGRATULATIONS!
Amazing that a house worth $40,000 would rent for $825
You’ll have some great cash flowAnd you’re right, it sucks that you have to pay a real estate commission since the agent did absolutely NOTHING to earn it. I would negotiate that down or wait for the listing to expire.
There are plenty more deals like this… go find another one!
At Dyches’s seminar this weekend, Terrell Sheen pointed out something I will put into the contract next time I work with a townhouse.
The suggestion: if there is ever a community assessment, adding on to the normal annual HOA fee, the cashflow to the homeowner should be adjusted until the assessment is paid off.
I guess there’s always a way to make the next deal even better!
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