Having trouble on what to offer for a 6plex

8 Replies

Hello everyone, i appreciate you for taking the time to read my question/post. There is a 6plex for sale here in my town of Deming NM. I recently spoke with the lady that is selling the 6plex. She told me the reason she was selling it was because she was tired of cleaning after people when they move out, that she has too many properties to worry about. She is currently asking $199,000 for her 6plex, and its been in the market for about 2 1/2 years. She told me that she will not do owner finance. Two apartments are 1 bedroom 1 bath and they are currently been rented for $400, the other four apartments are 2 bedrooms 1 bath and are been rented for $450.

I have recently been approved for a $95,000 home loan. i have about $10,000 that i been saving for the past 6 months specifically to invest in real estate. Here is my question, how much should i offer this lady for her 6plex? and how can i do it to raise the extra money that i need? Or what other options do i have to buy this 6plex? What are my options here? is it possible that i can buy this 6plex somehow?

@Daniel Perea ,

Welcome to BiggerPockets! This site is a great way to learn more about real estate investing.

I see where you are a truck driver. This probably means you have a lot of time to listen to the radio/iPad...

Perhaps you could gain some additional education by listening to the BP Podcasts, from start to finish. To help specifically with your question, check out:

Getting Started in Real Estate and Raising Money with Brian Burke

Cash Flow, Creative Finance, and Life with Ben Leybovich

The Ultimate Beginner’s Podcast For Real Estate Investors

Commercial Real Estate Investing With Frank Gallinelli

Buying Apartment Complexes, Raising Millions, and Building a Profitable Business with Ken McElroy

40 Quick Tips for Buying Your First (or Next) Investment Property

The home page for podcasts is at:

http://www.biggerpockets.com/renewsblog/category/p...

And perhaps you should put pen to paper and see if this is actually a good deal or not. Let's assume you can get it for $175K. You'll need a minimum of $35K down, leaving you a balance of $140K. 

What will your payments be? 

What are property taxes?

What expenses to you have to pay?

Have you figured out your "vacancy" expense? (hint, how much do you "lose" because it's vacant)

What's your monthly repair budget?

What's your budget for capital expenditures? (on A/C, roof, sewer line repairs, etc)

After all of that, do you still make any money?

And then you have to ask why it hasn't sold in over 2 1/2 years. And why all of the pictures online show vacant units (that's plural)?

From a financing perspective, it will be much easier for you to find financing for 4 units or less. Listen to those podcasts to learn why.

I didn't directly give you the answers you were looking for. As Napoleon Hill said in Think and Grow Rich, "Anything acquired without effort and without cost is generally unappreciated". 

I appreciate your passion for getting started, I really do! But if you are asking these questions, it might benefit you to spend an entire weekend doing nothing but educating yourself in some key areas.

Hello, Daniel  nice you are headed in the direction progress!  There is many options,, crowdfunding, hard money lenders, and partnerships, or maybe a family members? You have a advantage the property has been on the market for 2 1/2 years! On the offer check county records and check the price it sold for last, property taxes, research it all. My offer from that (((175K))) my guess!

@Daniel Perea @Jake Stenziano

Hi Daniel

This lady is obviously pretty motivated to sell.  Are those current market rents or can you raise them?  What is the per unit cost per apartment in your market?

You can possibly find a bank willing to finance it for 15% down if you show the bank the value the property offers.  IF you are purchasing it at a discount to the market and you can raise the rents while lowering her expenses, then show this to the bank.

Ask the seller why she does not want to hold paper?  Sellers are fearful that they will not get paid and have to take back the property.  Your job is to show this seller that you will follow through on paying her.

Finally, you could move into one of the apartments.  It may be easier to finance the property if it is owner occupied.

Good Luck!

@Ronald Perich

Ron

There comes a point in every seller's mind when it is time to call it quits.  Just because she hasn't dropped her price doesn't mean she isn't motivated.  If it is a good deal, he should just wait and give her more time.  I purchased a 136 unit from a seller who had it in loopnet for 5 years without dropping price.  Price was listed at 6 million.  I knew he was motivated, fighting with brother and just burned out.  I offered 3.7 million and we ended up at 4.075 million around 8 weeks later.  Seller came to reality and wanted out.

This seller may be different.  It helps tremendously if you have a seller that is motivated and you can solve a problem for them.

@Gino Barbaro , you may be completely correct. I'm not saying there might not be motivation there. I was trying to make sure @Daniel Perea understands that being motivated, even really motivated, doesn't mean it's a good deal.

I do like the suggestion of living in one of the units. Would certainly help with the living expenses. And it might make a small difference in bank finance underwriting.

First of all i would like to thank you all for taking the time to give me some advice. I have listened to around 80 BP pod-casts, i need around 35 pod-casts to finish them all i believe (correct me if I'm wrong). I do agree with what Mr. Perich said; "Anything acquired without effort and without cost is generally unappreciated". I appreciate the honesty. Mr. Barbaro i really liked your advice when you said "think in a way of how i can solve a problem for them". I had listened to some advice you all have given me on the pod-casts, and some i had not.

Again i am very thankful for this site and you all's advice, i will take the advice and do the best i can to fallow trough to make some offers if possible, if not i will move on because this is not the only way i can go.  Thanks again and i will see you all around this site. 

@Daniel Perea @Gino Barbaro Daniel, get your numbers in order - income,expenses, potential mortgage etc and take your underwriting findings to a community bank in your area that's looking to grow and is heavy into real estate. You stated that you were approved for a $95,000 home loan but this is an income producing property so you may be able to get financing for it. You must be prepared and prove your credibility to the bank so take time to prepare. The only thing left would be another $30k for the down payment. I have a feeling that you are closer to this deal than you think. Good luck.