Multifamily

8 Replies

Hello,

I have always wanted to own multifamily units of 4, 6, 8 or no more than 50. I have knowledge of several that are owner finance by the sellers. Can you tell me how I can get the owners/sellers to do a MLO with a realtor being involved? All advice needed.

If you know the sellers, why would you want a realtor involved?

What is a MLO?

There is no reason to have a realtor involved if the owner doesn't want one. If the property is already listed with an agent you are under no obligation to go through that agent (Unless you are also licensed) However the owner will still have to pay a commission and will probably want the agent involved. 

I also wondered what you meant by MLO.

MLO is short for Master Lease Option.

Thanks so much for the quick reply. 

what is the MLO for?

If I knew someone who wanted or would sell real estate with owner financing, I would:

Make a simple purchase/sale agreement.

Make a Promissory note with amount and payment terms.

Print a Mortgage Note to file at courthouse documenting the terms.

Simple

Getting the seller to accept the MLO with a realtor involved might be a challenge.

The realtor wants to get paid. The realtor gets paid on a sale. By definition, a MLO is not a sale now. It is a sale maybe later, maybe never. You can certainly approach the seller and realtor about taking the commission later. Or maybe taking part or of it from the option consideration. How much were you planning on?

If the properties are already offering seller financing, why do you need bring in the MLO concept? Are you looking for absolutely no money down on your part?

I am sorry it took me so long to return to the forum. I work crazy hours. I read all the replies and I am so grateful for all the information. Yes I don't have any cash to put into the deal. I am just starting out in multifamily.

If you have no money to put into the deal where will the money come for the option fee?  If I was considering offering owner financing and expected a down payment I would certainly expect an option fee for a MLO.

Also if you have no money where will money come for reserves and operating capital?

@Mary Evans  I've done a master lease option on a large apt community and it's great that you're thinking creatively on doing a deal. I also involved the brokers in the deal so they put their commission into the deal as part owners (therefore I had to raise less money out of pocket). However, I raised money to put in the deal. 

If you find a seller with a large pre-payment penalty then a Master Lease is a good approach BUT you need some cash. In my scenario, the seller still got almost 20% of the down payment. If you don't have cash them perhaps you can partner with someone to help you do the deal. 

I wouldn't be so focused on a specific tactic. Instead, I'd work on finding properties that fit your investing criteria and then if a property makes sense for a Master Lease offer it up. 

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