Nothing motivates a seller like a property that has been on the market a long time. I'd been watching the ads and saw an old office building that was originally listed for $65,000. The property seemed inexpensive for what it offered, so I created a file and added it to my properties to watch.
The property was in a small town 50 miles from me, so I wasn't too eager to get involved. But when I saw the ad that slashed the price from $65,000 to $40,000, I knew we had a motivated seller.
I visited the property with the Realtor and learned the building had been inherited by the seller. It was quite old, but functional. The seller got discouraged when she lost her only tenant. Then water pipes froze and burst while it stood empty. She made the repairs and decided to just keep it empty until she could unload it.
The property had two, multiple-room offices with separate entrances, a large shop, three garages, and a large fenced yard. Clearly there were many income opportunities. The building was on a main street leading to the area's medical facilities. But the town's population was only 3,000 and had zero growth. (And it was 50 miles away.) So I let it sit and kept watching the ads.
Soon the price was lowered to $32,000, so I took another look. I learned the property was assessed by the city at $74,000. This wasn't an appraisal, but it gave me an indication of its value. I compared it to other buildings for sale in the area and based on its size, location and multiple rental opportunities, it looked like a good bargain.
The Realtor told me she'd received several rental inquiries for the property, but the current seller didn't want to become a landlord again and had rebuffed the requests. I decided to get off the fence and make an offer.
My offer was $25,000, with 10% down and the remainder financed by the seller amortized over 20 years with a balloon payment after five years. The seller accepted the offer except that she wanted a two-year balloon payment. Because I was buying far under market value, I knew I could get financing later if needed. I agreed.
My payment was $161.20, and I had at least seven potential rental streams to cover this. I immediately started advertising and turned over management of the building to the Realtor who lived in the town, for 10% of the rents. This was April.
By June, we had a tenant for the three garages ($100 per month) and one of the offices ($200 per month). This covered the mortgage, taxes, insurance, and management fee, making the property "free."
In July, we rented the shop area of the building for $300 per month. In December, we rented the remaining office for $250 per month. Now the property generates a positive cash flow that exceeds $500 per month, and I never even have to go there. And the fenced yard is still available for additional rent.
Because I have established this rental stream, I can now sell the building for three times what I paid for it, ($50,000 profit) and it will STILL generate a positive cash flow after mortgage for whomever might buy it.
After my tenants build up a little more tenure, I may approach one of them to make the purchase, so they can get their current space "for free" AND earn some income. I might even carry the financing to better my return. In the meantime, the property is giving me an effortless monthly income.
It sure pays to watch the Real Estate ads consistently, so you can identify those older properties that might have motivated sellers.