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It would help if you have equity built up into other properties the seller could attach as security ( cross collateralization) in case something goes wrong.
My wife and I are torn, but this is a well maintained and updated property, the proximity to our own apartments is great. Please give me your thoughts!
I wanted to thank everyone for their input, it has been very helpful. As I move forward with due diligence and the numbers are refined I will post updates on this post. To answer some questions: I do not know if he is interested in seller financing, however, I will be inquiring today. I also want to purchase this property as it gives significant gains to our current operations across the alley, yet a 25% down is financially out of the question. So to make this work, I definitely would be doing this with no money out of pocket (to preserve reserves). I have never done this type of purchase, so I am a little leery of how to structure seller financing, or structure private money for the down payment portion. However, for our long term buy and hold, this property's possession fits right in. Thank You again!
(Depreciation/deduction worksheet). I keep looking for negatives, to the point I am assessing the local rental market as a whole. This procurement would allow me to eventually retire from the Army and replace the income I would be losing. The timing for this opportunity is eerie.
I wouldn't get too deep with this until you know the Nike Tech Fleece Aeroloft Parka Jacket
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After sitting down and calculating known expenses, inputting unknown expenses, and income, this property will clear $3,000 per month. Eight thousand in, five thousand out including mortgage payments, expenses, insurance, taxes, utilities, and upkeep. Its potential upside is 9 thousand per month. Very little yard, lots of parking. The updates list is very extensive. He does own it free and clear, unknown if he would do owner financing. Have not received my CPA's tax benefit assessment of the property yet. Nike Polo Shirts
What are similar buildings (10 20 units) trading for in this area. Is this an 8 cap area where you are buying at a 10? What's on the market right now in this range? I like that you have a great relationship with the seller and that you know the area so well. I really think you can use that to your advantage. I would get creative in the seller financing options. I would think the seller is going to want some type of decent downpayment though.(10 15% but that is just my guess). I would give him a couple of options that will go in your favor either way. Obviously figure out what his goals are but I am guessing cash flow is up there. You could go with asking sales price with seller financing on a higher term and lower interest rate. Or you could go with a lower offer price with seller financing. It already sounds like you are going to explain to him the benefits of seller financing.
Should I take it
Let us know how it all pans out.
So, I have decided on taking the property. But, I have consulted with CPA and Attorney will handle the moving of properties to create a single entity LLC with all rental properties into it. I have narrowed the numbers down to correct calculations and I will have 12% equity value into the LLC. I am having the hardest time finding financing though. I have found 90% LTV FHA/GMA type lending but am hesitant as it deals with the federal government, and I am still learning their 'rules'.
Also I would not expect to get 3k in cash flow from this property especially fully leveraged with down payment. After you reserve for capex I would be happy with 2k cash flow.
Very hard convincing a seller you want zero down. What if the property performs worse than when he owned it?? You start having trouble and then hand it back to him. He now spends from a distance a ton of time getting it to where it was and has to sell again. I have seen some sellers in this case taking a year or longer to get it going well again.
Two days later he invited me over to the property and showed me what he had to offer. Turns out he and his wife have been planning on downsizing their 34 units in three towns, and want to move to Florida by mid summer. He offered me his 14 unit apartment apartment mini complex at $485,000. I have watched in the last year all the updates to the buildings, however, he spelled them out on paper. Over $150,000 in updates; windows, doors, appliances, siding, insulation HVAC, the list goes on. It comes to $34,642 per unit. 12 units are two bedroom/one bath, two units are three bedroom/one bath.
seller wants to even entertain such a thing. You'll obviously have quite a few credits from prorated rents, prorated taxes and transfer of security deposits. You may only need to give him a note for 10 15% of the price after the credits are applied.
If he doesn't want to do it as a land contract than I would go for bank financing for 75% LTV and offer him a 2nd for the balance left over after credits have been applied. I would still offer this note on your other properties. I would think both the seller and the bank would be more open to this since the new purchase isn't carrying 100% of the debt.
He owns the apartment buildings across the alley from my two apartment buildings. We are three blocks from a University Nike Aeroloft Women Parka Campus. Half jokingly a few days ago I mentioned if he ever wanted to sell for him to let me know. He smiled big and said, "Well, funny you asked. I am getting tired of the snow and cold and Florida is calling to me for retirement."
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Any suggestions on finding private money lending would be more than helpful.
Not saying you will do this but this is worse case scenario that sellers think of when getting asked to do these kinds of things.
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