Rental Property Investor · Member since 2017 · 41 posts · 13 votes
Hello BP Investors.
I came across someone selling their 92 unit apartment here just outside of Houston. The seller and I are at a standstill on negotiating (she wants non-refundable earnest money), so I could use experienced apartment investors to help me analyze this deal to see if its worth putting up the earnest money to get this under contract. #help!
@Chris Murdien My guess is that the seller thinks you are a tire kicker and she is asking you to throw down some hard money to prove that you are serious. Your delay in response to her request is showing that you are not a serious buyer by the hour. (or at the very least, that you don't know how to negotiate.)
There are a lot more questions that @Nick Rutkowski should have asked. In fact, I am not sure why the price even matters. My first question to you would have been: "Have you done as much due diligence as you can to find out if it's a good deal?". Do you have a T-12 P&L and RR? Did you ask for copies of leases? (even though you probably won't get them before an offer.) Did you verify taxes and insurance? Is it in a flood zone? Is it properly zoned? Any liens or back taxes? How's the vacancy rate? Is there any deferred maintenance? Did you drive by?
My next question would have been: "Do you have everything lined up (down payment & lenders) so that you can actually purchase the property?"
If the answer to both questions is yes, then negotiate with her! Tell her you will put down $x as soft money, and in x days it will go hard. Write it into your contract. Make sure that you walk ALL 92 units. Make sure that if she needs to get you documents, like bank statements, or receipts, that the contract specifies that she must do that in x days (or your hard money down payment requirement will be extended) Just CYA (cover your ***)
@Chris Murdien My guess is that the seller thinks you are a tire kicker and she is asking you to throw down some hard money to prove that you are serious. Your delay in response to her request is showing that you are not a serious buyer by the hour. (or at the very least, that you don't know how to negotiate.)
There are a lot more questions that @Nick Rutkowski should have asked. In fact, I am not sure why the price even matters. My first question to you would have been: "Have you done as much due diligence as you can to find out if it's a good deal?". Do you have a T-12 P&L and RR? Did you ask for copies of leases? (even though you probably won't get them before an offer.) Did you verify taxes and insurance? Is it in a flood zone? Is it properly zoned? Any liens or back taxes? How's the vacancy rate? Is there any deferred maintenance? Did you drive by?
My next question would have been: "Do you have everything lined up (down payment & lenders) so that you can actually purchase the property?"
If the answer to both questions is yes, then negotiate with her! Tell her you will put down $x as soft money, and in x days it will go hard. Write it into your contract. Make sure that you walk ALL 92 units. Make sure that if she needs to get you documents, like bank statements, or receipts, that the contract specifies that she must do that in x days (or your hard money down payment requirement will be extended) Just CYA (cover your ***)
@Steve Hall I was thinking @Nick Rutkowski asked to calculate price per door. If you know your market, PPD could be a great way to see if the asking price is too high.
I don't believe the seller(s) view me as a tire kicker; she rejected all offers if they didn't agree to non-refundable earnest $. What the seller is doing is just negotiating based on how she purchased the apartments. No due diligence with non-refundable earnest money.
With her being from California, I told her "we don't do that in Texas."
The seller and I talked about soft vs hard; she's either hiding something or she needs the $.
@Chris Murdien So you didn't really need help. You already knew the answer... Only a fool would place a bet without seeing their cards first.
PPD doesn't matter to me, and I doubt it matters to you. The price is too high if it doesn't cash flow. And who really cares if the price is "too high"? You just offer what you're willing to pay!
BTW:
"We don't do that in Texas" is not a great way to negotiate with someone from California.
Try to give some thought to your post titles: "92 units outside of Houston", I thought maybe Richmond, Sugar Land, or Katy... not California!
Is anybody else able to help me determine if this is a good deal or not? I have the sellers financial information, rent roll, expenses etc.
With this being a new season of investing into apartments for me, I want to make sure $20k non-refundable earnest money from day 1 of the effective date is a wise move.
I know as the due diligence process moves forward, the asking price is always negotiable, at the same time, with the seller already showing she's a firm negotiator, I would hate to lose $20k because she don't want to budge on price when the lender and/or bullcrap turns up during due diligence.
That's annoying. I read through this because it was tagged as Sugar Land / Richmond Texas and they e-mailed me about it. It's about a property in California? This tagging system sucks.
@Chris Murdien Maybe I am the only one who has been confused by this post. Until just now there was no indication you already had financial details, rent roll etc. Why are you not plugging that into a calculator and then asking us to look at your deal.
It felt to me like you were asking for guidance on EM. But now you want deal evaluation and we have no numbers-but you do; well if you want help we need information. Over to you Chris.
This is the original post: I came across someone selling their 92 unit apartment here just outside of Houston. The seller and I are at a standstill on negotiating (she wants non-refundable earnest money), so I could use experienced apartment investors to help me analyze this deal to see if its worth putting up the earnest money to get this under contract. #help!
Whether CA or TX, $20k hard EM and $30k EM after DD is light.
In my experience, regardless of the market hard EM helps you win deals. I have been a part of 10+ transactions in TX where non-refundable day 1 EM was involved.
It really comes down to whether or not you believe in your execution and abilities. I'm sure the seller just doesn't want you to tie up her deal.
@Jared Carpenter I really appreciate your answer and I agree. Until I get seasoned and successful at closing apartment transactions, it would be nice to have someone experienced to "retrace" How I analyzed the numbers to confirm I won't end up like the current seller.
What is the blended and weighted in-place rent? What is the re-positioned blended and weighted rent?
I know approximately how much you'll spend running this building without looking at the financials. And, we know how much you want to pay. Your answers to the above will probably tell us if it's good, bad, or more analysis is needed.
Yes I’m seeing this as well. Get as much info upfront to make a decision on the property before signing contract. I’m seeing winning buyers offering 1-3% hard earnest money day one.
I came across someone selling their 92 unit apartment here just outside of Houston. The seller and I are at a standstill on negotiating (she wants non-refundable earnest money), so I could use experienced apartment investors to help me analyze this deal to see if its worth putting up the earnest money to get this under contract. #help!
@Derek Carroll and @Jared Carpenter You both gave bad advice to this new investor. Just because you see everyone speeding on the highway, would your advice to a new teen-age driver be to speed to? Putting hard money down on Day 1 is foolish, and no better than gambling.