Newbie to purchase a condo question!, I want to use private funding to purchase a condo...can I do this? Options

[MamaKaranja]

Hello,

So, a local builder developed 7 unit condo's in 2007, hoping to sell them. His aking price is $325K, a drop from the initial tag of $339K. He has been unable to move them and has opted for lease options @ $1875/month. How will buy down mortgage to 4% if purchased outright, but buyer would have to go through the local bank he is tied to.
My questions:
Is it absurd to offer builder 20% off his aking price?
Is it viable to use private funding to buy condo?
I hope to live in the condo for less than 2 years and then convert it into my first rental unit. How practical is this venture?
How best can I structure this deal? unsure:

[MichaelC]

Is it absurd to offer builder 20% off his aking price?

No. In fact, it would be absurd not to low ball this guy. You didn't say where you're located, but how is the condo market there? It can't be too strong if the homeowner has seven vacancies he can't sell.

Is it viable to use private funding to buy condo?

Viable and preferred. If you can avoid using banks, so much the better for you. Their fees and requirements can drain you to the point of hysteria.

I hope to live in the condo for less than 2 years and then convert it into my first rental unit. How practical is this venture?

That depends upon the local market. Will the property cash flow after you move out?

How best can I structure this deal?

For starters, you need to do a market analysis of what the properties are worth and what they will rent for. You'll also need to figure out how you will finance the deal. Then, present your offer.

[MamaKaranja]

Is it absurd to offer builder 20% off his aking price?

No. In fact, it would be absurd not to low ball this guy. You didn't say where you're located, but how is the condo market there? It can't be too strong if the homeowner has seven vacancies he can't sell.

Is it viable to use private funding to buy condo?

Viable and preferred. If you can avoid using banks, so much the better for you. Their fees and requirements can drain you to the point of hysteria.

I hope to live in the condo for less than 2 years and then convert it into my first rental unit. How practical is this venture?

That depends upon the local market. Will the property cash flow after you move out?

How best can I structure this deal?

For starters, you need to do a market analysis of what the properties are worth and what they will rent for. You'll also need to figure out how you will finance the deal. Then, present your offer.

Thanks for your invaluable response.....I must do my due diligence here....all the units were built for sale but builder put them all up for rent after he was unable to move them...market can't be that stronge....again.thanks for your response.

[MamaKaranja]

Michael C,

Thank you for your response....Here is my thinking....The builder is offereing the units @319,900 and will also help to close the deal ......remember he started out @ 339,900 in 2007,then dropped @ 325,9000in 2008.....this remains the same today but offering @ 319,900 for outright purchase.
I want to go even further and offer @ 272 K- 288 K ( 15% -10% discounted offer).

Want to buy two units either @ 576 k -544 k.
Present units for L/O @ 636 K (318k x2 ... units come @ 2100 sq ft)
----------
60 K back-end-profit.

Rental rates/cashflow @ $400 x 24 months (average rate go for $1400 @ 1400 sq ft.)Offer my units @ $1800...$75 less than builder.
-----------------------
$9600 rental income.

Total profit : $60,000 + $ 9600 = $ 69,000.

Private Money @ 10% interest ,24 months term.
Will I make money here ?

[MichaelC]

This deal with those numbers don't work. Borrowing at 10% on a $300K property and then renting for $1,800/mo, (if you can), is a losing proposition from day one. So, no, you won't make money with this deal as you describe it.