multi family owner financing eal

4 Replies

Hi my name is Monique and I am currently a property manager. I have been in property management for the last 10 years and I have always wanted to purchase my own property. I ran across a deal and because I'm a newbie to investing I would like some feedback. It is a 102 unit property with 1,2 and 3 bedroom units, it is currently vacant and selling for $490k. The owner is offering owner financing and is willing to rehab 10 units to be rent ready. My questions are: If I were to do the owner financing what should I ask for as far as terms go? Because the property is in need of rehab I don't feel a down payment should be an option. My other question is where would I get the rehab money from? Should I try to do a 2 fold like a owner financing/repair allowance deal? Is that even something that can be done? I really like the property and I would love to be able to purchase it. Any advice would be helpful. Thank you

Hi Monique,

Not sure if there's a typo in your numbers, but you mentioned that you are looking to buy 102 units for $490,000; that is $4,009 per unit. Is this correct? Also, the owner is willing to rehab 10 of the units to rent ready condition. 

As far as your questions:

1. How is the condition of the property and the repairs needed?

2. How much do you think you need for repairs? 

3. As fas as what can be asked, negotiated, and terms, who can lend you the money, etc. anything is possible. You can ask the seller, look for private money, find a portfolio lender, etc. It depends on what you want to do with the property and what the numbers come up to.

However, I will recommend you to check with an attorney and/or title agent first to make sure there are no issues that you may be overlooking. Also, an inspection will be a good idea.

In my opinion, as a new investor, this property is way too big for you, ESPECIALLY with it being vacant and needing rehab. It's going to take time to not only rehab but also qualify tenants to rent. That's a large property to rent out. I've bought many properties, quite a few needing full rehab, but I would never buy a property this large unless I had a sizable amount of money in the bank. Whatever you think it will cost to rehab, add at least 10% more into the costs. However long you think it will take to rent out all the units, double that time period.  

Now, as far as the deal. Sellers who carry the note will always want a down payment to cover their closing costs, any realtor fees, and general insurance that you will make your payments. When you buy a property with seller financing, you'll need your own money to do any rehab. Rarely will the seller fork over the money for your rehab. It's always worth a try to ask the seller for an allowance, but it rarely happens.

Just my opinion, of course, but it comes from a very experienced real estate broker/investor/rehabber.

Dawn

I agree with @Dawn Jett .  This project is way too big for a first timer.  There is a reason why this property is vacant and you need to understand that before you jump in and buy it.  If you get it under contract make sure you can get 90 to 180 days for due diligence.  If this is in a blighted neighbor hood that will make it even more challenging if you don't have huge capital reserves.  It really sounds like a very low price for so many units.  That is my 2 cents.

@David Fernandez yes the numbers are right. I appreciate the feedback and I think you guys are right. It would be a great deal for someone but not me at this time. I do have a question though. What is the best way to finance deal with no money down? I have been reading several of the forums here, but I just want to make sure I present the offer well and it makes sense for both me and the seller. This is a 72 unit for $540k and it's 61% occupied.