Once you get over 4 units, the building becomes a commercial property. The number of buyers for multi-unit buildings is MUCH less that the number of buyers for single family houses. The turnover in multi-unit building owners is very high because of the quality of the tenants. These tenants are often on the lowest level of society and the problems are many times greater than that of SFHs. Just this evening, I received a call from one of my tenants complaining about another tenant who was in front of the building drunk with a switch blade. This kind of stuff on a daily basis can drive you crazy, especially if you are a new landlord. That’s exactly why I always recommend that newbies start out with SFHs. They’re a LOT easier to manage and they’re MUCH easier to sell.
The point is that the deal can seem great when you buy and terrible if you must sell. To the uninitiated, being flung into managing a 6 unit building can be an absolute living hell, where the owner will do ANYTHING, ANYTHING to stop the pain!
Good question…motivation…This seller has moved 2 hours away from the property and doesn’t want the hassle of driving. He has moved up to larger apartments and is starting his own management company. He is willing to sell for what he has in the building and made the terms easy just to move it quickly. It turns out, he loves to chat about REI and should be a valuable asset for me in the future.
It seems we as newer investors should spend more time finding MOTIVATED SELLERS. The seller has actually accomplished my goal by acquiring 100 apartment units averaging $100.00 cash flow per unit. It can be done!
I am in Maryland, but where you are does not matter. What matters was that the seller wanted out in the worse way. The deal was a slam dunk for me. I have done 6 other deals just this year with those kinds of numbers. I got a call the other day from one of my contacts asking if I wanted a building.
The owner was across the country and just wanted out. The owner is selling me the building for whatever his mortgage payoff is. It is a two unit building that grosses about $1,000.00 per month. I am buying it for $40,000.00.
Sounds like you’ve gotten some real homerun type deals.
Unfortunately, those who subscribe to the “if it’s too good to be true” mindset would have probably passed on everyone of them.
So the lesson for today is: If it looks like a good (or great) price, get it under contract, do your research on it (due diligence), and close the deal if it still looks good.
If a person offers you a $100K property for $50K, then reason that they’re selling becomes just a routine question. Yes, I’m curious, but it’s no longer a “have to know the answer” question. If it’s a truly too good to be true deal, then your due diligence will find out why.
I know that most of the books/courses teach “find out why the need to sell.” That is a question that needs an answer ONLY when you’re still trying to negotiate the price to where it needs to be for you to buy it. If someone is asking $95K for a $100K prop, then WHY the need to sell becomes more important. If you can find the “why” cheaper than $95K, then you’ve made a deal.