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 ***)
So how did this end up? Property still not under contract? No attorney or broker drafting documents?
I really want to agree with the posts here, anything is a good deal at the right price, may be negative, but its a free market, offer what you underwrite, then move on to the next deal!
It works with a broker the same way it would work with an off-market offer to a seller you contacted directly.
A broker's responsibility is to provide the terms of your offer to the seller.
As far as a discount on pricing for going hard day 1, no inspection, ect...it may vary deal by deal, however there are a ton of variables that need to be considered. It all goes back to seller motivation.
I think what is important to consider here is that in most cases, a hard EMD/waived inspection doesn't get you a discount but rather WINS you the deal.
@Cody L., what kind of a discount from the asking price do you usually ask in exchange for no inspection/no contingencies/hard EMD from day 1? Does it work with brokers or only with sellers that you contacted directly?
Thank you Nick
I don't have a fixed discount from ask. I have a price that I'll pay. And if it's lower than what they want, or lower than other offers, I try to pitch the non price benefits of my offer.
@Cody L., what kind of a discount from the asking price do you usually ask in exchange for no inspection/no contingencies/hard EMD from day 1? Does it work with brokers or only with sellers that you contacted directly?
Thank you Nick
I don't have a fixed discount from ask. I have a price that I'll pay. And if it's lower than what they want, or lower than other offers, I try to pitch the non price benefits of my offer.
Maybe I should rephrase my question. In your experience, were you able to get 20%+ price reduction in exchange for non-price benefits?
I am here in the Houston area and pretty connected to multiple people in this industry. Happy to give you my thoughts. What is the area the property is in?
I have learned that some areas of Houston are micro climates that you need to be aware and stay away from and others that may be a great area to buy.
@Cody L., what kind of a discount from the asking price do you usually ask in exchange for no inspection/no contingencies/hard EMD from day 1? Does it work with brokers or only with sellers that you contacted directly?
Thank you Nick
I don't have a fixed discount from ask. I have a price that I'll pay. And if it's lower than what they want, or lower than other offers, I try to pitch the non price benefits of my offer.
Maybe I should rephrase my question. In your experience, were you able to get 20%+ price reduction in exchange for non-price benefits?
Yes. Depending on the seller. For some it's important, for some it's not.
Based on the questions your asking and the way you are asking them you are far from being ready to take a run at a 92 unit property.
Your seller would likely be keeping all your EMD when you can put the deal together because you have no team and you will not qualify to get the loan needed on this size property.
I could be off here but you need to go back to square one and start small as an LP on another sponsors deal or find someone to partner with who has taken down some deals full cycle. If you have the money to do a bigger deal on your own (50+ units) and not enough experience for the to buy and manage, guaranteed you will crash and burn and your equity will evaporate. A 5.3 million deal is no joke.