I recently contacted the owner of a quadruplex that I am interested in. The owner is a realtor and suggested to make an offer to see if we are in the right ballpark. They don't need to sell. This is located in a great area that has transitioned over the last few years. I know the owner got the property at a steal and that the current tenants are from before the neighborhood transitioned. Thus, my intention is to renovate and charge new tenants market rents.
-I am not necessarily concerned with current rent roll because I know what market rents are, although could be a negotiating tool
-I don't know the condition of the inside yet
-I have a general idea of what the monthly expenses after reno will be
-There is a strong comp from 5 months ago up the street that seems to be in better condition and is what I would be basing an offer off of
I am trying to figure out how to approach making an offer and responding back.
-Ask for all of the income amounts and request to see the property
-Not waste everyone's time by making a ballpark offer based on the comp up the street and then make any adjustments if the inspection and viewing of the property is in worse condition
Any suggestions would be helpful.
Well, there is no motivation that I see and being owned by a Realtor probably means they have a clue. If you're that interested get inside and look then point blank ask them what they need. If they put it back on you, I'd low ball em or walk away. There is no reason to try to talk someone into selling and then try to get a decent price, generally won't happen. It might be better to just let them know you'd be interested when they decide to sell. You can't buy them all.....and move on.
Hey I would say there is nothing wrong in presenting or having an attorney present what you feel is on the low side of a fair offer so they may have incentive to sell and you have some room if they counter. You know though wout an inspection you do not know what you are getting yourself into, but if there is warranty involved as a term- I'll pay this much w warranty about all listed contingencies may be a way to go. You never know what the true situation is, I doubt many would tell a prospective buyer they have to sell the property. You are betting on future development and that is how the big bucks are made! Good luck!
I’ll never get tired speaking the gospel of truth – nobody takes action involving RE unless there is a problem to be solved. You, as a real estate entrepreneur, are there to solve a problem. No problem – no deal. Move on…
Hey Rich, I agree with Bill. If the guy is a realtor and owns rental property, he probably understands that his rents are possibly under market and that the area is improving. That doesn't mean he won't be receptive to an offer...though if he acquired the property for a killer price and it's cash flowing like a bugger, he'll either sell at a ballpark price(+/- a few %) or he won't.
So, I think option 2 is best. If he's game at that price range, get more info and adjust the price as necessary. Best of luck.
Thank you for all of the helpful advice. If anything materializes, I'll be sure to post.
Update: The owner is retiring and would consider offers. I suggested a ballpark number based on a comp and was told they don't really want to get a lump some for the property and are looking for income so they want to seller finance. 6% was mentioned. The place needs updating to get market rents (which are 100% higher than current rents) and it doesn't seem like the owner wants to do this. I am planning to give the owner the following options:
1) Ballpark offer prices at 4%, 5%, 6%...5 or 10 yr 30-year amortized seller financed note with a clause for us to opt out if interest rates hit a certain point. I feel the biggest risk is having to refi and pull the renovation dollars out at higher rates when the note comes due, but the acceleration option would allow me to refi at a rate I would need to still get my return in case rates sharply increase before the end of the note.
2) A price given conventional financing, which will be higher than the above.
The owner mentioned they plan to list the property on MLS next month. My offer price for conventional financing is around 20% less than what they plan to list for, so I don't think we are too far off.
Just a question but how did you contact the property owner? Was it through mail, email, or phone?
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