Multifamily Avg. Per Unit Cost?

Question

Hello BP Community!

I'm looking to get into small to medium multifamily properties in the Twin Cities metro area. My goal is to purchase this property utilizing creative financing, more specifically seller financing.

Through the enormous amount of research I've done, a common strategy is to find tired landlords with a ton of equity or fully paid off that are looking to move on from their property because they are tired dealing with tenants. This has usually been geared towards single family houses.

Has anyone here seller financed a multifamily property? If so, what are some strategies to target those owners directly?

Any help or advice would be greatly appreciated!

James Hamling · Answer

@Josh Ashland your question is answered by simply putting yourself in that targeted persons shoes.

Say you own a 24unti building, have had it 22 years.

If you've had it 22 years, we can safely assume insights like one knows what they are doing. So, why would that person be willing to sell and most importantly, with seller financing. If it were you, what would you need to do it? Yeah, first and most importantly is TRUST.

Who would hand away a multi-million dollar anything, blindly, to who-ever? No, they need to TRUST that person not only will pay, but that they have the ability to run the place. And someone of 22yr ownership, they have an exact specific way they want things done.

Now, why wouldn't they sell it for cash at closing? Because there is no shortage of buyers with $ to buy it. Why would you? Yeah, right, because your getting a better deal from that seller financed buyer.     Ok, so when a person can sell a polished-turd of a property at a 7-cap, how are you going to give a "better deal"? Are you going to do a 4 cap? How will you make $ and survive?

Right now in this market, your not going to get some 10-cap with seller financing, that's just a pipe-dream. Only if it's got some serious issues, massive problems that will require serious work and capital to correct. Because if it didn't have those, again, they could just sell it to someone who brings cash at close.

Zak Carchedi · Answer

Sometimes you can get seller financing if you give them a great deal. Maybe they are stuck on price and want a certain number but it doesn't make sense with the interest rates. Why not ask them to carry loan and you pay them a lower rate than the market. I have a friend who just got a seller to carry a 10 year note at a 3.5% rate  sooo when they say it's impossible, keep looking!

Josh Ashland · Answer

Thank you everyone for you insights!

Trevor Mauch · Answer

@Josh Ashland Great questoin and awesome you're diving in on multi-fam!

I've bought several multi-family and commercial buildings on owner carry and I feel those types of deals will only increase the next 3-5 years. With interest rates higher it means fewer buyers are out there on these properties, and the boomer generation is the largest holder of rental real estate still (outside of large institutions) and they are getting to a spot where they're ready to sell... combine that w/ higher interest rates and I feel it's ripe for people wanting to sell w/ owner carry.

I like pulling lists of people who have owned multi-family 10+ years in my buy areas and sending them letters and calling. It's worked for me in the past and I feel it'll continue to work.

Online can work as well for smaller properties (duplex, tri plex, 4 plex, maybe up to 10-20 units max) because the people owning small multi-family tend to still be the "mom and pop" and will go to Google to search phrases like "sell my duplex by owner" or other phrases like that... the search volume is low but it does happen. I have a Carrot site setup for that to rank for those types of phrases.  Properties 10 units or more those sellers tend to really go to brokers or sell to their known network or to people who get in front of them w/ offline marketing. One key to it all though especially on owner carry is like @James Hamling mentions, building trust and credibility are key and can make or break the deal. So having a solid online reputation is more important than ever... it could mean the difference from someone selling the property to you or not. I hope that helps and good luck!

Bryon Andrews · Answer

Josh, lots of options and depend specifically on the sellers situation. I'll send you a PM and we can connect!

Josh Ashland · Answer

OOPS...Originally had a different question regarding per unit cost which is why the title is that. Then changed it and forgot to update the title.

Rookie mistake haha

Multifamily Avg. Per Unit Cost?

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