I’ve been talkng with the owner of ten (4) plexes, he’s selling for 155k each and $500 down, but I’m not ready to get in so deep so early, I was thinking more like getting like 2 or 3 of the 4 plexes and take it from there. I told him this and he’s insisting on selling them as a package deal, and that he’ll finance them for me at 6.5% and get 2k back at closing for each building. I’ve done the comps, due diligence and all looks good, (so far). We’re going to talk more later today (I told him I needed to really think about it), at this point, I really don’t know what to do, knowing that he now wants to sell them all together to me, but at the same time I only want 1 or 2 of these 4 plexes to start.
if you were in my shoes, what would you do and how would you do it?
would you be wanting all four after say two months or so. If so work him a help me help you deal. buy two now and two in a month or two. And so on and so on That way you can have time to get caught up on the first couple of them.
While I was typing that thought two… Do you know anyother investors that might want the other two and if so can you transfer the loan to another investor and get say 1500 per property profit why not?
Ahh man thought three… Have you pulled any title work to see what loans are now on the property?
and four… Why is he wanting out so bad do they all need huge repairs
and five… are they all occupied will you cash flow or at least break even
and six… Have you got an inspection report on all the properties?
Wow that was a ton of thinking for me to do I need a beer now!
You didn’t say what your experience level is, but unless you’re a very experienced investor I would NOT buy ten 4-plexes. I would strongly recommend getting into landlording by purchasing single family houses. They are a LOT easier to deal with, a LOT more forgiving, and the tenants are much better. Although it’s not politically correct to stereotype anyone, I can tell you through personal experience that the tenants are VERY different as you move down the socio-economic ladder. If you’ve never done a multi-unit building before, I definitely would not take on more than one or two of these buildings.
I would also find out what the story is on the seller. Why is he selling? Why is he willing to carry the financing and at such a good rate of interest? Something’s up and I’d find out what it is!
Yeah, you’re right too. When he told me that he’s trying to do this as a package deal instantly I had a not so good feeling about it and told him that I’d think about it and get back with him later. This has been on my mind all day and I’m to the point of just leaving him alone and moving onto other properties that I know about. While taking the drive back home, the question came to mind ( what difference does it make if I buy 1 or 2, it’s all money and it’ll add up in the end).
First of all, he is offering seller financing I assume? It would be very hard to get 10 4plexes just starting out when you have to go to banks to get the money. That right there is a HUGE positive…
Is he giving you a 1-2 year rental history? If the buildings can be taken over WITH $2000 cash back and postive cash flow I would jump over this deal in a heart beat. In fact I wish I could land a deal like that. Of course everything looks good on paper, the trick is finding out the REAL reason he wants out. But if it is JUST how you described it you would probably have to shoot me dead to stop me from making this deal.
You’re right, that’s the big question I’m wondering about. I’m
constantly thinking how can ask him why does he want out so bad
without offending him, I wouldn’t want him to cancel out on me if he
has a logical explaination. I’ve emailed a RE agent I now and
asked why are the sellers in that area so motivated. I’ll know
something by the end of the day for sure.
But if this guy just wants out, and there’s nothing tricky or offbeat about the true reason, I was thinking, if I was to get involved, I’d bring in a partner.
Whew 40 aprtments and 30k a month has me thinking.
Seller financing should have you thinking even more… That is hard to find!
Also, don’t be afraid to ask tough questions. As a high level IT consultant I am used to it; asking tough questions that may impact a $400,000 deal is part of my daily process but you would be amazed how being able to do that puts you ahead of the rest.
Just watch around, watch what GOOD investors and money makers do. They ask awkard questions and don’t have shame doing it. You wont offend the guy, he wants your money. If all is well then he IS making good too because he is getting interest off of you. Like I said with all the details you lined up this deal is hard to pass up. The problem is if you get into this and decide its not for you and you can’t handle the load then you’re stuck with 10 4 plexes.
There are alot of questions that may need to be answered on this deal, but why the seller is selling is hardly the most important. Nor is it hard to find out. Simply ask, "why are you selling?
If you get answers to the more important due diligence questions, it’ll probably come up anyway, but it sounds like that maybe that is his niche. He packages instant landlord/investor deals.
More important questions:
Is $155K for a 4plex a deal? What is FMV for them in your area?
Does each property cashflow?
If he’ll sell only one or two at a time, is the price the same or higher?
What’s the terms of the owner financing?
Are they currently rented/leased? If so, how much?
$155K for a $180K 4plex isn’t bad on one property, but if I were buying 10 at a time, I’d want a better discount off of FMV. 80% would be right at $145K each.
By “terms” of owner financing, you need more than an interest rate. How long is the financing, what amoritization is being used, etc.
How are you figuring $2K a month in cashflow for each property? Using 6.5% interest and a 30yr term, you’ve got a mortgage payment of nearly $1K a month, not including taxes, insurance, maintenance, etc. Using the lenders’ 75% of rents method, you’ve got $1650/month gross profit, or $650/month cashflow Not bad for basic numbers, but you need to know how to figure cashflow and work the numbers in detail, again for EACH property.
All 40 units are currently rented at $550 each? If so, and assuming my figures above are close, that’s a positive monthly of $6500/month or $78K a year, which I might add, will be basically taxfree.
If you’re not interested, please forward me this guy’s number
how’d you determine they’re worth $180,000 and if they are worth that much, why is he willing to discount them $25,000 each? also, why would he want to offer basically you 100% financing on owner carried loans ($500 down on $155,000 sales price). that’s not enough to cover closing costs, title costs, escrow, etc. how is going to give you back $2,000 per building if you only give him $500 per building.
sounds like a good deal though if they are worth $180,000. would be interesting to find out where they are located (at least general area). 4 plexes out here in southern cal / orange county are typically $800,000 to $1,200,000 depending on location, square footage, age, etc.
