Reader Question: Hi Monty, I have a question about some properties for which I want to create a purchase proposal for the properties’ owner. Quick background: these are modest houses in a decent neighborhood where we 
own other rentals. One is vacant. We have a rental right next to the five that I would like to purchase.
I have become somewhat of a friend of the homeowner to whom I want to make the offer. He is an elderly fellow at around age 90 whose wife is ill. He owns five homes, including their residence.
These houses are from the ‘60s era, and all floor plans are the same throughout the neighborhood. He has kept them in good shape. They usually are valued at around $65,000. If all of his properties are rented, he grosses $3,000 a month.
I would like to make an offer on all five, including his residence, where he can live rent-free for the rest of his life while I rent out the others. As a stipulation, I would like to get a great deal that would be favorable to him as well. Any suggestions? — Thanks, Mario D.
Monty’s Answer: You know much more than I know about what has transpired in the relationship with your neighbor. Based on what you describe as your goal, I can share a couple of ideas that may be helpful.
The needs analysis
Learn how he thinks about his property and his situation. Tell him you are interested in acquiring the properties. You want to sit down with him (and his adviser) to better understand how he is thinking about his real estate and his future. Tell him you do not want to waste his time (or yours) making a proposal to him without the benefit of his input first. Here are some example questions you can ask him:
- Have you ever considered selling your property? (If he says, “Yes,” then ask him if there is any reason he hasn’t done it already.) (If he says “No,” then ask him if anything is preventing him from doing it.)
- Where would you move to if you sold the property?
- Is anyone helping you take care of your wife?
- What about your family (unless you already know); would they be interested?
- If you could pick the ideal way to sell your property, what would it be?
- Do you still like taking care of the property?
- Are you concerned about losing the rental income?
- Are you concerned about outliving your money?
- Have you been through the senior housing development over at ____? (offer to take him and his wife to look.)
There will be other questions that come up. Without saying it, you want to express genuine concern for their situation. The way you demonstrate this to him is through the questions you ask. You are seeking to understand. This meeting is a “needs analysis.” You want to learn if there are some drivers that may give you hints about how to proceed (or how not to proceed).
Take a step back
Once you have a good grasp of his fears, desires and intentions, tell him you want to think about possible ways you could work with him to acquire the property. Ask him when would be an appropriate time for you to get back to him with some ideas.
Absorbing the discussion
Depending on how you interpret his reaction to the discussion, you may decide just to offer to buy the vacant one, buy the four in which he is not living, or buy them all.
Consider passing on the life estate for a great deal. It complicates the calculations and is difficult to project because you have no way to calculate how long he and his wife will live. He also may be leery of the idea. Instead, consider offering him a land contract for cash flow. Then it can be a fair deal.
If he does not want to sell them all or wants to die in his home (not uncommon) perhaps you could propose he grant you a right of first refusal. If you give him options that you know you can accept, it is a way to discover how he is thinking.
Calculate
Now you can crunch the numbers under different scenarios, some of which he may have already indicated an interest in pursuing. Determine which ones work out best for you. Now you can make a proposal that fits his desires and defeats his fears. He may even suggest a proposal you never considered.
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