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#416867 - 12/13/12 05:35 AM How much "bringing a good deal" is worth?
Lehub Offline
Junior Member

Registered: 12/13/12
Posts: 1
Loc: USA
What is the value of "bringing the deal"?
What is the value of me being an excellent tenant with 9 years worth of rent already paid to the landlord/seller?

Quick story after a lot of fighting and negotiating (details below), I secured a very good deal (4-family brownstone, $140 NOI, 11% CapRate, approved FHA loan). I offered 40% ownership to my initial partner, and i got 60%.

Now a new potential partner is willing to finance it via a commercial loan, and offers me 40% ownership while he gets 60%. He also would have 2 units + basement + back-yard + front-yard. I would have 2 units and air-rights.

How fair does this proposal sound to you?



Details
- 4 unit multi-family building (in which i live) for sale at 1.5M in rapidly gentrifying neighborhood of NYC.
- After crunching all the numbers and carefully writing a detailed and creative business plan, the property shows exceptional figures ($140K NOI ; 10.5% Cap Rate).
- After meeting all the local lenders, I find one who loves my project and accept to back me up provided i bring over a co-signer.
- Lots of cash-buyer and private investors are fighting over it: thanks to my ability to get along with the seller and his family, i get the deal at 1.4M.
After long and patient negotiations (i have been an excellent tenant in the building for 9 years - the total of my rents exceed $240K over that time), i manage to have it under contract for 1.2M.

In my mind, this then officially becomes MY deal.

- After research, I finally find the perfect co-signer/co-borrower/co-owner partner (to whom i offer 40% ownership), and we got enthusiastically approved by the lender (FHA loan, 3.5% down payment ($75K)
- 2 weeks ago while my attorney was starting the legal due diligence, my initial partner got scared of the prospect of dealing with an entire building (tenants, garbage, boiler..) and decides to drop out (he bought a small condo nearby instead).

He introduce me to a good friend of his interested in my deal: this person makes me an offer, or a "first draft" kind of offer, in which an LLC is created (i m part of it) and buy the building. He would secure the loan and the down-payment (30% or more).

It has to be said that this person (commercial real estate agent) and his wife (architect) know the business pretty well and have been unsuccessfully trying to buy in this area for the past 2 years.

Personally, after all the effort i had to put in order to win it. I feel like he s "stealing" this good deal from me, and limiting the potential profit.
I had a perfect plan with that FHA loan, but because this new partner is not a first time home buyer and prefer to do an LLC, we have to go for commercial loan, which is beyond my means. Even though this means i end up with 40% without putting down anything, I think it s a little too easy when you have the money to abuse a situation: i m concerned than down the road, when problems arise, the fact that i was not part of the financing could be used against me.

I feel like i did a lot for that deal to exist and to be offered to them: plus i successfully negotiated $200K down on the price thanks to 9 years of paying a rent on time (value $240K), so this is not like i didnt bring any money to the table at all.

I d like to at least get 50% (or 51%), 2 units, air-rights, and half of the basement: am i totally greedy/unrealistic here?

Anyone with the same experience?
Advice on negotiating in this type of situation?

Thank you very much for sharing your thoughts/stories/feelings.

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#417084 - 12/18/12 07:52 PM Re: How much "bringing a good deal" is worth? [Re: Lehub]
Scintillion Offline
Member

Registered: 01/26/12
Posts: 437
Loc: Colorado, USA
Good luck with getting everything together for the deal. Lots of options here. Sounds like you are going to get it done!

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#417089 - 12/18/12 08:19 PM Re: How much "bringing a good deal" is worth? [Re: Lehub]
Vermont Offline
Major Contributor

Registered: 04/12/08
Posts: 7950
Loc: Vermont's North-East Kingdom
Yes, it sounds like Lehub is wearing three (3) hats: Seller; Landlord; and Tenant. He just needs to convince another Buyer/Landlord/Tenant of the value that is offered here . . . . but no one else can see it quite as clearly as someone who is so deeply involved.
_________________________
Dale C. Hittle of GOLDEN RULE PROPERTIES in Glover, Vermont
Where We're Always Striving To Put Together "THE FAIR DEAL"

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#417096 - 12/18/12 10:01 PM Re: How much "bringing a good deal" is worth? [Re: Lehub]
Dodger52 Offline
Member

Registered: 10/14/11
Posts: 266
Loc: Montana
Is the Down payment split according to the percentage of ownership, and is the investor/partner fronting part or all of it?
_________________________
Dodger52 (Chris)
Prudential Montana Real Estate
www.MT-RE.net
www.facebook.com/MissionValleyMTHomes

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