I have a Las Vegas couple that I've been working with on purchasing their properties. I made them an offer of $1,150,000 for their 13 properties that are all rented out. ARV is $1,292,600 they want $2,175,000. All of the properties are rented out bringing in approx. $13,685 per month. These properties are owned free and clear. The thing is they are selling them to the renters for the asking price and carrying back the loan for 5 years. (The reason they wont come down is because the renters are paying way over ARV) Should I try to find a buyer who is willing the pay the 2 mil. plus my fee, or should I leave it alone?
Perseverance is pushing through despite difficulties.
Sounds like the seller wants to cash out big time...
If the tenants are buying them up, will there be any left for YOUR end buyer?
Have you run the numbers and the nitty gritty?
Do you have NOIs, CAPs, ROIs monthly expenses, etc?
Wait, the ARV= $1,292,600 and he's selling for $2.175 million? HUH?
Let him carry back...You carry on.
Shop for what your investor buyers want! Make it win-win.
Investors need to buy @ 50-70¢ on the dollar to make a deal profitable.
This is NO deal.
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"ARV is $1,292,600 they want $2,175,000"
What are your chances of finding a buyer willing to pay way over ARV?
I look else where for another deal, theres better deals out there,but its up to you, wishing you well, Jim
jbischoff
I wondered if someone else knew of strategies to over-come the ARV being over 80k below the sellers price. I don't recall seeing any such thing in my studies thus far. I wondered if someone might demonstrate the calculations to figure in something like cap rate in order to calculate when, if any, equity might begin to accrue.
Carl
http://freedomstrategiesunlimited.usapropertywholesale.com
Sometimes we tend to forget that the basis for a good deal is the seller's motivation. If the motivation isn't there, neither is the deal.
Too bad this isn't facebook otherwise i would like TRSD's last post
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Thank you for your help. I talked to the Success Academy, so I'm just going to send the sellers my offer in writing and move on. They are in their mid 70's and the husband is still running around collecting rent, fixing things, being the handy man. He told me they really wanted to sell, but the wife is dealing with the financial part of it. I'll just wait this one out and let them get back with me, when they realize they are overwhelmed with all those properties.
Perseverance is pushing through despite difficulties.
Definition of 'Capitalization Rate'
A rate of return on a real estate investment property based on the expected income that the property will generate. Capitalization rate is used to estimate the investor's potential return on his or her investment. This is done by dividing the income the property will generate (after fixed costs and variable costs) by the total value of the property. If you want to get technical, it is basically the discount rate of a perpetuity.
Capitalization Rate = Yearly Income/Total Value
Also known as "cap rate".
Capitalization rate is a good jumping-off point to quickly compare many investment opportunities, but it should not be the sole factor in any real estate investment decision. Many more factors need to be looked at such as the growth or decline of the potential income, the increase in value of the property, and any alternative investments available.
For example, if Stephane buys a property that will generate $125,000 per year and he pays $900,000 for it, the cap rate is: 125,000/900,000 = 13.89%.
But it gets a little more complicated. What if the property's value rises to $2 million two years later? Now the cap rate is a less favorable 125,000/2 million = 6.25%. This is because Stephane could potentially sell the property for $2 million and use that money for an alternative investment.
Say the property has an NOI of $125,000, and the price is $1,125,000.
$125,000/ $1,125,000 = 11.1% cap rate
I was told You’re not qualified. You don’t have the ability. You’re not sufficiently skilled or educated and closed minded buy one person ...so I hung up on him.
Then another said I think what your trying to do is illegal.assinment of contract or double closing.Right now I'm trying to find a agent that will help me find Egypt, Soon one who will take me out of Egypt, Then one who will help find the promised land.
is too high assuming your ARV is correct. If you trust your calculation then move on as this is a waste of your time. If you want to pursue it, can I also interest you in a bridge I own in New York?
Always Looking to Acquire Houses | Always Looking to Amaze Investors
Diana,
Thank you for addressing cap rate and clarifying it. My post clearly demonstrated my newbie status. I spoke without a clear understanding of what I spoke of. *chagrin* Cap rate has nothing to do with trying to calculate projected equity gains/losse.
Carl
http://freedomstrategiesunlimited.usapropertywholesale.com
Think of all you just learned exploring this deal. We have to pass a lot of bad deals to come upon the killer deals. Good job taking action and just keep at it!!
Blessings & Favor,
Gena.
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