Cash buying an out-of-state multifamily?

7 Replies

After much searching I've found an out-of-state multi-family building that looks like a good buy.  I researched on Zillow and found a great agent with a great reputation and today she reached out for me to the seller's agent about the building and its status.  A summary of that conversation is that the building's in good shape and leased out completely, but the seller wants a cash buyer, which is why it's priced attractively.  Also mentioned was that it's very difficult to get in to see those units, and my agent surmised that the seller has had difficulties with banks before.  These two together seem like a red flag, or is this a typical appropriate attitude for a seller to take?  We have about half of the price of the building, but not the whole amount; we're also not excited about using all of our cash for purchasing, since we expected to put a percentage down on this one and be able to buy another building also.  Is there a creative way for us to finance this so that we can come in as "cash buyers"?  Should we even try?  Without seeing inside the units, I'm not sure how hard we should push on financing...

Without knowing what the asking price is and estimated value I can only make assumptions. A lot of times it is hard to find true value on a small multi unit. Sometimes in bad areas or possibly not enough good comps. You could get a hard money loan and then refinance out of that into perm. financing. You could offer a little more above asking price to get them to let you do bank financing?  A lot of times it is really hard to set up showings for all 3 units, especially at the same time. 

Good luck

@Lucy Tschappler

I say make an offer that works for you. Let the seller decide if they are willing to accept it. You never know what’s motivating people so throw an offer out there and see where it goes. What people want and what they will accept can be two wildly different things. If you want to walk all the units (highly recommended) as part of your inspection/due diligence, put that in the offer.

If you like the building, I say go for it!

@Lucy Tschappler You can have the agent make an offer that isn’t “all cash” and is contingent upon an inspection. The worst thing that can happen is that the seller will say “no”. And you could be out the cost of an inspection if they are really trying to hide something.

Normally I hate the idea of “get it under contract and then negotiate further” but if the owner won’t let you into any units then you really don’t have a choice. Hopefully they’ve at least provided a T12 or something so that you can surmise some kind of value.

Side note: “Hard to get into” doesn’t mean impossible. Just make yourself available. If they stonewall it’s because they probably want some kind of an offer before bugging tenants. Which can make sense, you don’t want to show it to every person that asks only to get lowball offers, owner financing requests, etc.

Thank you all for your input.  It helps to be able to step back and look at objectively like you all.  I have some decisions to make and now I have some fodder for making them.  Appreciate your help!

@Lucy Tschappler . If the building is completely leased out, where do you think would be the value-add you can get on this deal? What building class is this? A, B or C ? Have you looked the current rents and compared them with the area rents with for similar properties? 

My approach would be, if the I can't get into any of the units, then I definitely would assume the worse and I would make my offer based this worse case scenario. My experience has always been to assume the worst in "C" class properties, if I can't see any of the units. You can also make an offer now and renegotiate after the building the results of the inspection.

Thank you, @Henri Meli. I've realized I don't know this prospective market well enough and I live too far away to invest out-of-state right now so I'm not agonna even offer.  I had realized that I would have to assume the worst, but I really wanted this to be a jewel in the rough that I had found.  It might be one, but I live too far away and have too many home responsibilities to be the one to refine it at this stage of my life.  Thanks for the input!

@Lucy Tschappler

HI Lucy,

I am pretty skeptical when up say you found a great "agent" on Zillow for multifamily.  If you can't get in to see the units, the broker is not doing their job.  You can always put down all cash, and then go to a bank and refi the property.  You can always try to raise the money from investors and pay them back when you secure bank financing.

What does proved attractively mean? Is it above the market cap?

Gino

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