Option to Purchase 100 Unit Multifamily Building

11 Replies

Hello. I came across the owner of a 96 Unit apartment complex that would like to sell his property. He owns the property free and clear. I'd like to put the property under contract for 90 days and include his willingness to seller finance 15% of the down payment. Which form do I email him to put a property of this size under contract?

@Ryan James What experience do you have in multifamily? What partners do you have to help close this deal? How do you know it’s a good deal? Do you think you should be attempting to put something like this under contract when you don’t know how?

I'm not prepared to purchase this property as I don't have the experience necessary to oversee the improvements. I'd like to wholesale the deal. These are the numbers:

Current Valuation:

96 Apartments // 12 Buildings // 8 Units Each Building

(Qty 4) 2 beds $475 $1,900

(Qty 2) 1 beds $365 $730

(Qty 2) 3 beds $515 $1,030

Monthly Gross Rent $43,920

Annual Gross Rent $527,040

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Proforma Valuation After Rehab

96 Apartments // 12 Buildings // 8 Units Each Building

(Qty 4) 2 beds $625 $2,500

(Qty 2) 1 beds $550 $1,100

(Qty 2) 3 beds $700 $1,400

Monthly Gross Rent $60,000

Annual Gross Rent $720,000

Quick NOI $360,000

Stable Value $5,142,857 ( 7 Cap )

Max Cost Basis $3,600,000 ( 70% ARV )

Renovations $1,200,000 ( 12,500 per unit )

MAO $2,400,000

One thing I'll add is that to whomever you wholesale this deal, your Buyer will most likely be bringing somewhere between 10-15% down. Many apartment lenders want no more than 70% LTV. You might luck out and get 75%. How goes progress on your Buyer's list? I know 90 days sounds like forever, but when you talk about needing someone or a group of investors with $1 - $2 million sitting around ready to go that could take awhile if you haven't already built credibility.

Plus, what's your plan if you do find someone and they get in collaboration with the Seller to just wait you out until your deal expires?  You're not a licensed agent with a listing contract, so anyone who you introduce this deal to can just wait for your contract with the Seller to expire and then grab it.  You would be due no commission in that case and they could negotiate with the Seller on the side.  

The thought here is the Buyer can be patient.  You cannot.  Therefore, you need not just one but at least TWO buyers who are ready, willing, and able to tackle a deal of this size.  That way if one tries to short cut you, the other can jump in and get the deal.

Btw, if you don't know how to put a deal like this under contract, I think you may be putting the cart in front of a horse.  Technically, you can do it with a single sheet of paper.  "Seller X agrees to sell property at 123 Anywhere Ave Units A - ZZ for $X,XXX,XXX on or before (today) + 90 days to Buyer Ryan James or Assigns."  Sign and date.  That's really all it takes from a bare minimum standpoint.  However, there are a lot of this's 'n that's such as assignment of contract, due diligence, permission to show, division of closing costs, financing contingencies (if any), earnest money, etc. that also needs to be hashed out.  I recommend you get with an attorney who specializes in large real estate transactions and pay a few hundred bucks to have him/her draft you a form.  He/She will have the experience of many deals to steer you thru the 1,000 "Oh dang, I didn't think about that" scenarios that come up and torpedo these deals.

This isn't the place to go cheap and try to save a few bucks on an online forum, where the quality of the advice varies depending on who gives it, and you don't really know if any of us know what we're talking about other than from our handsome pictures and thumbs up scores.  If you want to play in the big leagues and not lose out, it's time to spend some money!

P.S.  I'm curious, how much Earnest Money is this Seller wanting?  My guess is he won't settle for the typical wholesaler "fee" of $25 - $100 that the gurus tell you to use.

We didnt discuss earnest money. This deal requires $120,000.00 cash to close or 5% of 2.4 mil. The seller will carry 15%. It is true that i may get cut out of the deal after 90 days. 

Quick update. We were able to lock this property up under contract. I was fortunate enough my friend offered his partner who is a commercial broker. He knows two interested buyers in the Columbus, Ohio market. We made an agreement to split the proceeds 50/50. He walked me through the LOI and Purchase Agreement. We toured the property and found a lot of differed maintenance. Super fortunate this Brooklyn property owner had an outlier property in Ohio and wanted out.

Originally posted by @Ryan James :

Hello. I came across the owner of a 96 Unit apartment complex that would like to sell his property. He owns the property free and clear. I'd like to put the property under contract for 90 days and include his willingness to seller finance 15% of the down payment. Which form do I email him to put a property of this size under contract?

 Hi Ryan, this is quite the deal to wholesale. A good amount of things change when you get into large multi-family buildings like this one. I'm not sure how to go about wholesaling this, do you have buyers for this one? Good luck, if the numbers work, there are a ton of people looking for large multi in Columbus.

Hey Zeke. Found this one an hour outside of Columbus while checking out another 8 unit property. I had a couple buyers in mind but both have moved on to larger properties in A and B neighborhoods in a little better condition. I found it beneficial to partner with a commercial broker my friend works with as he's well connected to buyers and already had a few in mind when i shared with him the numbers. We're spiting the deal 50/50. As a condition of our arrangement, he asked that I not attempt to find buyers to avoid a situation where we both bring an equally qualified buyer. 

Originally posted by @Ryan James :

Hey Zeke. Found this one an hour outside of Columbus while checking out another 8 unit property. I had a couple buyers in mind but both have moved on to larger properties in A and B neighborhoods in a little better condition. I found it beneficial to partner with a commercial broker my friend works with as he's well connected to buyers and already had a few in mind when i shared with him the numbers. We're spiting the deal 50/50. As a condition of our arrangement, he asked that I not attempt to find buyers to avoid a situation where we both bring an equally qualified buyer. 

 That's great, way to leverage the partnership. If you ever get anything in the 5-30 unit range, let me know! 

This sounds like a very interesting deal. Congrats on getting it under contract! Keep us updated on if your partner finds a buyer. Make sure to establish a detailed JV agreement between your partner and yourself to make sure you are both on the same page.

If a seller of a 96 unit is open to wholesaling his property, then it would seem there is limited buyer pool for the asset.  Properties of that size are typically owned by more sophisticated investors.  Even if they are 'mom and pop' they will probably know they can make more by having an aggressive broker sell it.  If it's in Florida, I'm interested!