UPDATE #1
We’ve learned the house is owned by a woman in her 90’s who refuses to budge on her price. Some creative thinking is in order:
Clue #1: Lady in her 90’s is not likely to tote the note, unless we could come up with something that would get her paid off within 3-5 years.
Clue #2: Research suggests we *might* get $600/month rent.
Clue #3: Taxes and insurance estimated at $1500/year.
Clue #4: The house probably needs at least $5000 in work just for starters (primarily roof and exterior paint)
Mythical Offer #1: 20K now, no payments on balance, balloon note of 20K in 2 years. This would allow time to get new financing after the seasoning period of one year.
Mythical Offer #2: 10K down, 5 years at 5% interest, payments of $566. Estimated rent: $600/month. Rent will not cover expenses as taxes and insurance run about $1500/year.
Mythical Offer #3: Guess I’m tired, because mythical offer #3 appears to be on vacation.
Conclusion: While 40K is a fair retail price, we can’t pay retail and make enough profit to keep moving forward. If the mrs. wanted to become the next Resale Shop Diva of Bohunkville, this might be an excellent move. Just not sure we can make this work with an inflexible seller.
UDATE #2
*Love* this time of year…
This trumpet vine…
…now looks like this. (Note new topsoil spread artistically about the premises.)
This hydrangea…
…now looks like this.
And these grapevines…
…finally look like this. (Grapevines are notoriously slow getting to business.)
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Follow-up comment rss or Leave a TrackbackHi Connie:
I might chase this bus, at least for a little while…
If the seller is at all sentimental about the house, having someone respectfully renovate the house should appeal to her. Suppose you sat down for a nice cup of tea with the seller, and brought her a list of the improvements you plan for her house with their costs. If the house has been on the market for awhile and she’s out of touch with renovation costs, that might be all it takes to convince her to drop the price and take a note.
I would propose a different financing arrangement - a much longer amortization schedule (say 30 years) and a due date more reasonable for her circumstances (say 3 to 5 years). Firing up my trusty 23 year-old HP 12c, it looks like if you offered her $35,000 with 20 percent down, you would owe her a balance of $28,000. At a more enticing 6 percent (she’s getting 3 percent on those CD’s down at the bank), I calculate a monthly payment of about $168. Add the $125 a month in taxes and insurance, and you are at $293 a month.
Once you fix the place up (say $10,000) and rent it out at a conservative rent of $550 gross (you pay the taxes and insurance and the tenant pays the utilities), you should be able to refinance or sell when the balloon is due. In the meantime, you should get a decent return on your $17,000, as long as the place is rented and the tenant pays as agreed.
Even if you don’t proceed today, I would keep my eye on the property. If the house stays on the market for another 60 days, I would try again.
Great to read on your post ,
Something inspiring , thanks & wish to say Hey !
Tracy Ho
wisdomgettingloaded
Aha~! You’re totally right
That should’ve been mythical offer #3 but the brain refused to cooperate without additional caffiene.
Another investor’s suggestions are good ones. I can’t tell if you’ve already had an offer rejected or not, but if she’s not getting any takers atm, and all else fails, make your offer, and let it sit. Time, as they say, makes fools of us all.
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