Ep 175 How To Deal With A Seller’s High Asking Price

<p>We use the example of a seller asking 700K for a property worth only 600K. Here are the important things that have to work for you, if you overpay for a property-</p> <ol><li style="font-weight:400;">These are probably deals you should hold yourself, so you don’t have to convince someone else to over pay for the property.</li> <li style="font-weight:400;">You need a low down payment because you are already overpaying for.</li> <li style="font-weight:400;">You need considerable principal paydown. Either by principal only payments or low hybrid interest rate for a longer term. </li> <li style="font-weight:400;">You need to be able to pick your monthly payment. This is probably the most important thing.</li> <li style="font-weight:400;">You need a longer term 5-10yrs.</li> </ol><p> </p> <p>Let's say we offer 700K with 25K down. That's a light down payment. Now we need to pick a payment that works for us. So let's say you can rent this property for 4K/month then you would want your payment to be 2,500/month so you have some cash flow. Now you need a term long enough to end up at an 80% loan-to-value by the end of your term. So that when you refinance or sell the property you won’t have to come up with money out of pocket to do so. </p> <p> </p> <p>Now what kind of offer can we put together? Well, given that your financing 675K (PV on your financial calculator) and your payment is -$2,500 (PMT on your calculator), you need to play with the term (N on your financial calculator) and the interest rate (I/YR)...</p> <p> </p> <p>Here is what I came up with. </p> <p> </p> <p>Purchase price 700K with 25K down. Present  Value 675,000. 1.8% interest for 10yrs (120 months) with a monthly payment of 2,500 would give us a balloon payment of $479,582.22 at the end of our term which is right where we need to be for 80% loan-to-value. This offer allows you to over pay,  to cash flow the property, and to be in a position to refinance at the end of your term without any significant money out of pocket. If