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so complex it might just work

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Anyone done something like this and have some input?

 

Old man Bert needs his cash. 120k to be exact, so 50 head of cattle can have land to graze.

 

Bert owns a lot of deeded land around this area, including a ranch which he wants to move out to full time. But for now, he lives in downtown. He's seen many sunsets and has grown tired of city life. He owns 2 downtown lots next to each other, one of them holds a 4 unit apartment complex (2000/mo c), the other holds a 4br. Both have to go together. He's had them for sale for 3 years, since his wife passed.

 

He says he wants 400k (not a bad price right there). If I can just get him to move down to 350k the numbers are safe, I think. Bert is cool with carrying some of it.

 

Enough background, on with the deal!

 

Anyway, I'm saying.... buy them bothwith conv. financing at 200k, 3.5% and old man bert carries at 160k, 3.5% simple interest, 5 yr balloon (total PITI = 1900/mo), Bert cuts me a $10k check at closing to cover repairs/cllosing costs.

Then, lease-purchase the 4br at 200k, 6k down, 1 year option, 1200/mo 50% rent credit (2000c+1200c-1900c=1300/mo c [i do need a safety net for the 4 unit since those leases are standard leases])

When TB brings the new financing, refinance the 4 unit @ 175k by applying the difference in purchase prices from the 4br (less down, less rent credits)

 

Result: deeded downtown 4 unit that easily cashflows 500/mo net. Just gotta get old man Bert to accept 350k, not 400k. good news is.... 50 head of cattle gotta have good grazing grounds, and I doubt anyone around here is going to outsmart me on this one!

 

Does that double closing deal sound reasonable? TB brings financing and at the same time I restructure my financing? The reason that NEEDS to happen is the conv. financing is going to be a 1st lien secured by both lots (that's how I'm hoping to get it at zero down). Once the TB exercises the option, they'll need their lot unencumbered, and refinancing would bring down the debt service on the 4 unit, making it a secure cash-flowing investment.

 

Please, offer any suggestions you can think of. This is so complex, I feel like there should be a better way.

 

The plan for now is to go see old man Bert later this week and gather some more facts about the 4 unit. Then I'm going to get to crunching the numbers. The taxes are going to be an issue too.

 

Many thanks,

 

Nick

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The plan for now is to go see old man Bert later this week and gather some more facts about the 4 unit. Then I'm going to get to crunching the numbers. The taxes are going to be an issue too

The last sentence you wrote is the first order of business. See good ol' Bert for more details about the properties and, more importantly, more details about his motivation and flexibility on all of this.

 

Anyway, I'm saying.... buy them bothwith conv. financing at 200k, 3.5% and old man bert carries at 160k, 3.5% simple interest, 5 yr balloon (total PITI = 1900/mo), Bert cuts me a $10k check at closing to cover repairs/cllosing costs.

Great if you can, but lenders these days are skittish about these investor/non-owner occupied deals. Many variables come into play here, but be aware that you may not get such great terms from the bank.

 

What about the owner's need for $120K? With the deal structured as you describe, will your $200K conventional note cover that?

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$300,000 cash would work for him. He wants a few days to think on it, I'm supposed to crunch numbers too, but he gave me a right-of-first-refusal on a handshake.

 

Cattle gotta eat.

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Dropped his price $100K? Sweet. You must have scared ol' Bert with your east coast smarts. B)

So where does the potential deal stand now?

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So this one got complicated.

 

Turns out Bert misunderstood me and thought I was offering 300k up front plus 100k owner financing.

 

I'm kind of tired of going to meet with him and I'm ready to let his motivation really set in. I've talked with him for over 6 hours. It's all good except I've never sat down him him for less than an hour, and we're going to need his son around for signatures on any documents anyway. The last time I went to speak with him (after putting an offer in his hands) he basically revealed to me he had no idea what we had really been talking about. His motivation, although high, is not high enough for me at this point....and I missed making 2 offers that afternoon because I got locked in another hour++ conversation with him. Not to mention I missed an afternoon float trip.

 

That is some of the best property around, but it's back-burnered. Need more motivation. Perhaps mid to late Sept. I will find him again.

 

I figure letting him remember what it's like to have no serious offers will help him get down to business with me. As much as I love the conversation and banter, I do this as business and I can't let someone who is only semi-motivated think he can buddy-buddy me into a huge cash offer. He doesn't get it and things are too busy right now for me to get tied up in a deal that's dragging.

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Time is a great motivator. Today's lackadaisical attitude often becomes next month's "are you still interested in my house" phone call.

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