Good morning all. I'm new to multi family investing. I've been a real estate wholesaler for 5 years and have wholesaled 2-3 units however this is my first attempt at commercial apartment buildings; I have 4 viewings scheduled tomorrow. I plan to either wholesale the properties for cash or negotiate seller financing and wholesale the properties. My question is I've been having a tough time getting financial details about the properties before going to view. The owners bulk at the idea of discussing the financials before I view the property. Is it typical for commercial property owners to discuss the financials after viewing and receiving a letter of intent?
Part of your home work should be to figure out a bulk of the financial's before hand. If the apartment complex is all 2br/1ba 1,000sqft units, look for rents on other units in the area that are of similar size & offer similar community features. In most places you should be able to get the tax record's online & get a good idea of what they have been paying per year on the property. Armed with that data you can be standing on a stronger footing when you view the property.
If you determine that the rents should be $750/unit and they tell you that they are only at $625, then perhaps there is room for improvement in the rents, or if they say rents are $1000/month then that might raise a question. If they have high vacancy, perhaps you can improve on the management, or is that the usual rate for the area?
Hope that helps some. Not trying to bust your bubble, but I never trust the data that the sellers give me, I always try to figure out for my self what the correct numbers are or should be. Food for thought and my 2 cents worth.
Best of luck.
As @Jesse Waters points out you really do need to know a lot about the marketplace dynamics in advance. Getting to know the local multifamily market is something you'll have to spend time doing if you want to be able to uncover hidden value.
Now as for a seller not wanting to part with their information. Unlike a listed property where an agent has gone in and provided an estimate of value that is agreeable to the seller and then after signing an exclusive listing agreement provides all of the financial data for the broker to assemble into a report format, you instead are a stranger.
You're not a broker, but instead are a potential buyer. Many owners feel the more information they provide to you the less leverage they'll have to negotiate against you. When dealing directly with sellers, as the investor, the best approach is to get bits and pieces of information prior to the meeting, and then once they've seen and met you and you've verbally expressed interest then say something to the affect of "I'm seriously interested in buying your property, but before I can make you an offer I need to review x, y & z.
The process of working the seller in this way takes a little more time, but you'll find the information tends to flow more freely after a) they've met you and b) you've expressed interest in making an offer.
thanks for the feed guys. Jesse, I appreciate the advice you're not busting my bubble at all. My strategy is always to elicit as much info as possible before deciding to make a trip to view the property. The info I've been able to get so far is number of units and bed count. One of the properties is a 24 unit and they are evicting all 24 tenants very poor management. My attempt to get questions about operating expenses have been a little challenging
Just a follow up. I got one property under contract. Buyers are interested but have not received a solid commitment yet. Thanks for the advice guys.
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