I just spoke with the owner of 10 (4) plexes, he’s asking 155k per building. We talked and walked thru the whole area that he have. It needs some minor work done, we went back in his office and I said what if I offer something like ummmmmm, say 149k for each, he said he would only be breaking even (in my mind, I really didn’t want to hear it, because I see he really wants out), he says he can do a owner finance @ 6.5 if I come up with 5k for each buliding and he’d give me 2k for each building after closing.
There’s 1 thing that I don’t like is the fact the 10 apts. are empty, I’m thinking of I was to get this, I’d only get the occupied buildings.
Tell me what you think…
And 1 more thing, I ask was it under contract, he said some guy suppose to come tomorrow and they’d do it, but prefer to deal with me instead of him. (in my mind I’m asking why not him, and why does he really want to sell it all)…
help me out here everybody, what would you do if you were in my shoes?
Should I go along with what he’s thinking or should I deal with a HML.
Have you ran the numbers? Do you have the current rent rolls? What are market rents?
With respect to owner financing vs. HML, I would say it all depends on which one has better terms.
If you think you can turn the vacancies around, then I would do the following.
Determine the true value of the property. This means figure out how mucht he property is making right now with the 10 vacancies. Base you price on the value of the property.
Get it under contract
Do you due diligence. This means verify leases, verify rent rolls, verify past expenses so you can accurately estimate your expected expenses for the future. Determine what the market rents are. Determine why there are vacancies and determine if you can rectify this.
Get the property rented out, increase the rents (if possible, even a little will help). If you can get the vacance rate down and increase the income, you will immediately increase the value of the property. At this point you can flip or hold on for cash flow.
The owner finance will be far more attractive at 6.5% vrs 14% for the HML. Also the HMLender will want 4 or 5 points to do the loan. If you are getting $155,000 building for $3000 down you should grab it right now.
For sure do your inspections but do not be too picky. A little paint and clean up can go a long way. Is their a unit that is “Rent Ready” or all they all trashed or almost ready all but …
The reason for the vacancies would be my main concern.
Keep in mind that you should be able to pay the bills with 30 units rented.