OfflineWas on CL and found what I think may be a deal...
"Fantastic 4-unit building on the border of Kettering and Oakwood. These buildings were selling consistently for $150,000-170,000 in the late '90s up to 2007. Now steal this one for only $106,500. All units have nice hardwood floors, updated kitchens and baths. The windows have been updated within the past 5 years as well. Tenants pay their own electricity, which includes baseboard heat and wall a/c units. There is an attached garage that provides 1 parking spot per unit along with additional storage in the basement and coin operated laundry that provides additional income.
This property is close to downtown Dayton and Kettering making it a great options for either young professionals or college students attending the nearby University of Dayton or Sinclair Community College.
This property will produce a gross rental income of $1,700 per month with tenants paying all utilities when fully occupied. "
So I emailed the listing person saying, I may be interested in your multi-family unit in Kettering if the terms are right and you finance 100% over time. Please let me know what terms you are considering and maybe we can work something out.
I got this reply and I was hoping someone could give me some advice, bad or good, I would like to know how some of tyou that have finished deals would proceed. I have not yet looked at the property because I have read that I should make an offer, wait for offer to be accepted and then look at the property... So please be brutaly honest.
Kevin, thanks for your interest. Normally, on owner financed deals we look for a minimum of 5-10% down, an interest rate of about 8% on the remaining balance and, depending on price that we work out, we will carry the balance for 3-10 years.
It seems to me the only issue is the 5-10% down... I am wanting 0 down deals so that I can get my feet wet and build my networth so that I can go at some bigger and better deals. And I could use some help as to how to re-approach this owner... I am not afraid to make an offer but I am afraid of messing something up. Any help would be great...
My first challenge seems to be knowing what to do and when and with what offer.
Looking at my counties Auditors website in reference to this property, it was re-appraised in 2008 for 133,450.
Thanks to everyone in advance. Ill be watching this post like crazy.
SHORT TERM & Long Term GOALS
Expand my knowledge about REI and read 2 more books.
Never Give up and Succeed!
I'll do my best to describe a potential no money down opportunity.
You first need to approach a local bank and discuss your thoughts on this property once you have the numbers on the property;
Income
Expenses
Net Operating Income = Gross Income-Expenses
Cap Rate (Google Cap Rate for explanation)
Assesses Value (Call the town)
Value of Property = NOI/Cap Rate
Then if you can have the owner hold a note or owner finance 20% of the asking price, then the bank may finance the 80% in a conventional loan format as long as the appraisal of the property comes in higher than the asking price.
Hope this makes a little sense, but the hope would be that the bank would be OK with having the primary mortgage for 80% of the homes worth, the owner holds a note for 20% and you then own the property with no money out of pocket. The owner may do this as they still get paid money for 80% of the property value.
Luck is when Preparation crosses paths with Opportunity!
bring in a partner
If the sellers don't budge on the earnest, or won't work with an owner financing option, don't not try and look for other chances
I am a HUGE!!!! advocate for college town properties; why??? because the turover is alot quicker and its been my experience that college students pay more frequently than regular tenants
Do your research, stay in touch with seller, and get a partner(s) in on the deal. Even if % wise you are the minority owner, I say go for it. Its a start that you can't go wrong with
So last night I made another offer, well basically the same offer because I didn't really think that the first offer was an offer... here is what I wrote.
"Brad,
Thank you for your response. I completely understand your position in reference to the 5-10% down, however what I am looking for is 0 money down, 100% financing with the balance being paid in 5 years. The 8% interest is typically what I have seen in the market we are in today. I would give you your entire asking price of $106,500 and would ask that you waive any payments for a period of 60 days so that I can make any repairs and make certain all units are rented. Obviously this would be contigent on me inspecting the units and you accepting my offer.
I believe this could be a win win situation for both us.
I look forward to hearing from you"
And here is the response I got today. I actually think it weent pretty well beings I have absolutely no idea what I am doing, lol.
"Kevin, thanks for your interest but $106,500 is already a well discounted price for 4 unit bldgs in that area that are already rehabbed and cashflowing. We would not be interested in doing no money down or waiving payments for 60 days. The minimum we would do is 5% down with a sales price of $110,000 with the balance on a 30 year amortized note with a 5 year balloon. If you applied the security deposits and first month's rents that would take care of half of your 5% down payment but you would still need to bring some money to the table. Let me know if you have a change of mind."
I really think that what was emailed back to me seems fair and I really want to make something work, I mean he really is being fair from what I can tell. So I think I want to make him an offer doing the above but I am concerned on where I might get the remaining funds to complete the transaction. Anyone have any ideas or want to partner up to make this transaction?
Also, I am wondering if their is any other fellow DG'ers here that are active and from the Dayton, Ohio area?
Looking forward to any and all replies!!
Kevin
SHORT TERM & Long Term GOALS
Expand my knowledge about REI and read 2 more books.
Never Give up and Succeed!
"Brad,
Thank you for your response. I completely understand your position in reference to the 5-10% down, however what I am looking for is 0 money down, 100% financing with the balance being paid in 5 years. The 8% interest is typically what I have seen in the market we are in today. I would give you your entire asking price of $106,500 and would ask that you waive any payments for a period of 60 days so that I can make any repairs and make certain all units are rented. Obviously this would be contigent on me inspecting the units and you accepting my offer.
I believe this could be a win win situation for both us.
I look forward to hearing from you"
And here is the response I got today. I actually think it weent pretty well beings I have absolutely no idea what I am doing, lol.
"Kevin, thanks for your interest but $106,500 is already a well discounted price for 4 unit bldgs in that area that are already rehabbed and cashflowing. We would not be interested in doing no money down or waiving payments for 60 days. The minimum we would do is 5% down with a sales price of $110,000 with the balance on a 30 year amortized note with a 5 year balloon. If you applied the security deposits and first month's rents that would take care of half of your 5% down payment but you would still need to bring some money to the table. Let me know if you have a change of mind."
I really think that what was emailed back to me seems fair and I really want to make something work, I mean he really is being fair from what I can tell. So I think I want to make him an offer doing the above but I am concerned on where I might get the remaining funds to complete the transaction. Anyone have any ideas or want to partner up to make this transaction?
Also, I am wondering if their is any other fellow DG'ers here that are active and from the Dayton, Ohio area?
Looking forward to any and all replies!!
Kevin
are sound and fair. You can't go wrong with either
Kevin, wish I were in Dayton! I'm in Ky. Sounds like you are off and running. I would get a hard money if I couldn't find one.. I might be able to help some.. i am waiting to close on my deal I have here.. might be interested in helping.. PM if you want let me know what your offer is and we will go from there.. Kevin
Kevin,
PM Sent.
Elix Brown,
Thats what I was thinking.
Kevin
SHORT TERM & Long Term GOALS
Expand my knowledge about REI and read 2 more books.
Never Give up and Succeed!
as much of the receipts and info as you can that shows the operating expenses.
Ask for rental records, tax records, income statements, balance sheets; they should be willing to provide all the information to you so you can see on paper the history of the rental.
Good job on finding a great deal!