That scary moment when you open the email titled “Counter Offer!” and find out that your low ball offer on a property was not accepted but that the seller has a very reasonable counter offer which is well below your max. My heart was racing as I realized that our goal of owning another real estate investment (other than are owner occ duplex) could actually happen, soon.
We have been saving for another investment property for 4 years now. As the vacancy rate in our town is about 1% rental properties tend to go fast even though real estate is not cheap. There have been properties listed one day and under contract the following day, or within a week. Any property priced at $350,000 or below is snatched up so fast that it is hard to compete. Last week we looked a one property that was at the top of our budget (and above the $350,000 number). The numbers looked great so I called around to all the local banks knowing this could be a roadblock.
Since Mr. SFF has been self-employed for only a year and a half they would not consider 2 of his 3 income sources toward the calculations. No bueno. Our local credit union though was at least willing to consider us so we scheduled a meeting. After an hour and a half meeting, our mortgage lender had all of the information and thought that we had a good case for the underwriters to review. It was not a clear cut case but they came back a couple of days letter with an approval for the amount we needed for a 30 year mortgage and a current rate of 4.25%. We couldn’t believe it! Well, I mean we are are good risk and have had a relationship with the bank for more than a decade, but still amazing.
Now with our financing in order we had a decision to make. Was this the right property for us? Both of us seemed to be hesitating a little so when Mr. SFF saw a tweet about another duplex for sale we decided to check that one out before moving forward.
This other duplex was slightly less expensive, had lower rents, but still had a cap rate of just over 7%. But the biggest difference was that due to the location, the tenants were more likely to be regular people and not college students. The other one was destined to be a college party house and we both realized that this was why we couldn’t quite pull the trigger on it.
So after getting a few questions answered, we put in an offer on Monday night on the second duplex at almost 10% less than asking price figuring the worst they could do was say no. But to our surprise, their counter offer was very aggressive at only $10,000 more than our original offer and well below what we were willing to pay. OMG! This could happen! It would deplete most of our cash savings as we were hoping to find a property that cost less than $350,000 but should give us a great cash flow which will be a huge step towards financial independence. Now of course we know this is not a done deal as there is the inspection, appraisal, fire code inspection, etc but we are moving forward. Wish us luck!