Bob Nelson – Financing

Right now we’re talking about the negotiating terms of investments.

Featuring:
Bob Nelson, Eugene real estate investment broker
Marcia Edwards, Eugene residential real estate broker

Marcia Edwards: Bob, I remember early in our hosting about 16 years ago, you said something about when you’re negotiating real estate, it’s not necessarily the price, it may maybe the terms. It’s all in the terms and that really spun my head a little bit thinking, well, it’s so much about price when I have a conversation with a potential buyer.

Bob Nelson: Yes, it’s an interesting process because it’s possible to take a very mediocre property and make it attractive because of very favorable interest rates. That interest rate may be good only for the first five years or even maybe the first three years or maybe it’s variable thereafter. So once that, once you’re past a period of time for which the favorable interest rate expires, you still have a mediocre investment, so be careful. Don’t get swayed by what we have right now is very favorable financing, but don’t get carried away. The birthday cake has to be under the frosting, the whipped cream, et cetera.

Marcia Edwards: That’s right. I love birthday cake. In regards to that financing, you want to make sure that you’re planning for eventuality A and B. It may be that you intend to sell in three years, but it may be that life happens and you don’t have the savings account that you had hoped to by that time and you need to go five years. So look at that latitude as power and control and influence over your long term plan.

Bob Nelson: Well, and with investment property now the properties that you sell, the house, duplex, triplex, fourplex, the residential stuff, you can get a 30 year loan, a term that will allow you to pay back the loan over a 30 year period. So your monthly payments are going to be fairly low and the interest rate will be fixed for the entire 30 year period. That’s not the case with anything other than a residential loan. The house, two plex, three plex, fourplex. If it’s a fiveplex, it’s a commercial loan and those loan terms talk to Isaac Grant, Northwest Community Credit Union. He has outstanding rates, but I’ve got to tell you, the amortization term may be 25 years and a balloon or all due and payable at the end of the 10th year. That’s standard for commercial financing.

Marcia Edwards: One example I see is when you take a 15 year mortgage in hopes that it’ll always be something you can pay, pay at the rate of 15 years. We get to the 30 year for your plan B in residential.

Join Eugene, Oregon, real estate experts: Bob Nelson, Real Estate Investment Broker with Pacwest Real Estate Investments, and Marcia Edwards, Residential Real Estate Broker with Windermere Real Estate, daily at 5:30 on KPNW for the “Real Estate Today” radio show.