I bought my first Multifamily (triplex)!!
Hello BP Nation!
I am here to tell you all of my latest closing. I got my first multifamily investment! As some of you may know, last month I celebrated being a bicoastal investor when I settled on a single family property in South Florida. While I was there for closing, I decided to make the most of my time, and look at other properties. I found a triplex in the area I wanted near Palm Beach Gardens, FL, but it was slightly overpriced. I called the realtor, and they didn't pick up (THINGS TO REMEMBER #1: If you are a realtor, and you want a sale, ALWAYS pick up your phone). With no answer, I decided to drive by to see the neighborhood. There was a FSBO sign with a different number than the realtor, so I called, and it was the seller. The seller had an exclusive agreement that if the realtor found the buyer, it was 3%, and if the seller found the buyer it was a 2% commission. Upon my walk through, there were things to take notice, but overall in good condition, just a bit overpriced. I pulled out my trusted Buy and Hold spreadsheet, using the same calculations as the BP Calc page (thanks guys!)... and begin to show them why they haven't had the activity that they had hoped. (THINGS TO REMEMBER #2: Always know your numbers to determine if the deal is good). Seeing the lack of cash flow, they agreed to negtiate. (THINGS TO REMEMBER #3: Had the realtor picked up, NO WAY I'd be able to negotiate directly with the seller). I ran through my numbers and came to a great number to begin negotiations (THINGS TO REMEMBER #4: If your initial offer doesn't make you cringe, you're offering to high... stolen from many BP posts. Not mine originally). I came in low, they told me their bottom. They were far apart, we split the difference. We had closing on Friday, so it is officially mine.
Overall, I got the property for less than 80% of asking price. Also, it should be noted that the rents are way below market value (about 80% of market value). The seller's logic behind this was that it was easier to find tenants and to keep long term tenants by keeping the rents low. (THINGS TO REMEMBER #5: Under market rents, where there is no rent control, is an advantage to the buyer). The value of the property was shown by how much income was coming in. When I can show the sellers that the property isn't worth what they think it is using this valuation, it opened the door for easier negotiating. Overall, with the rents far below market, I am still cash flowing $430+ a month (5% vacancy, 5% maintenace/repair, 5% capex, 10% prop mgmt). Bringing the rents to 90% of market will cash flow $655+, and 100% market value would be $880. Being that I would like to keep the tenants, I would never make the dramatic jump to market value, but I plan to get there incrementally (perhaps over two years). I'll keep everyone updated on the progress. I couldn't have done it without the help of BP Nation! Thank you all so much!