I have been looking at a multi-unit building and the seller is asking about 7k over what the county website has it assessed at. Comps are near the assessors value. He seems hell bent on selling it at that price because he tried to sell it 6 years ago for what he is asking now. I'm not really sure where to start negotiations. I was think of making an offer 10k below asking which would be 3k below assesed value? Cash flow and return rate is good even at his asking price. It could always be better!
@Ryan Ericson how long has he been trying to sell it? $7k over doesn't seem too bad, depending on condition and total purchase price since it is a multi unit. Just keep in mind that your assessment will go up to the purchase price, changing your taxes. Also, are all the units in good shape and do they have good tenants, which he can prove have been paying on time? I would start with what you want to pay for it and see what he says. 10k off is not that much, how much is it percentage wise?
Thank you for the response. He has been trying to sell it again for about 2 months now. Units are in average shape. I will have to ask about the tenants. 10k off would be around 10% off asking. You made a good point about the taxes going up. I'm only slightly concerned about that. Like you said, I think I will just go ahead and make an offer and see what happens.
P.S. One thing that I thought was strange is that he did not want the tenants to know he was selling it. That makes me think he has a few bad ones in there.
Most landlords do not want tenants to know they are THINKING ABOUT SELLING because it could make the tenants nervous and/or want to leave. Especially if they're happy tenants with the current landlord. There's always the "what will the new person be like?" Question they have to ask.
Now, as an agent, to your question, I always think like an investor when it comes to investments. Figure out your max offer & stick to it. Start somewhere under that. How low you start can depend on many things. How long has the property been for sale? How much competition is there for that property (similar properties also for sale), how seriously do you want them to take your offer (also, how bad do you want it?)
Sorry answered your question with more questions, but not an easy answer.
Thanks for the input Shane. Its been on the market about two months now. Competition is probably average to below average. Sometimes a property will sit on the market for over a year depending on price and neighborhood. Most multi-unit properties move slow so I think the buyer has a bit more leverage.
Know your max, offer 10K under asking or so. See what happens next. Play the game a few rounds or send them a highest and best with a 1 or 2 week offer expiration.
When making an offer, if you're not embarrassed by it, then it is too high. I am looking at two 4 plexes and I'm probably going to offer 25% below asking, which is 10% below county appraisal.
Some sellers are floating a sale. They don't really want to sell it, but would if they got their price. Two months isn't that long. If it had been around as long as the quads I'm looking at, 6 months, then I'd offer even less. Multifamily units are more difficult to sell than single family houses.
As stated previously, landlords don't want to scare the tenants off, but it they are under contract, they couldn't leave any way. With multifamily units, leaving doesn't present an issue. What might be occurring is that if you are unable to speak to the tenants, you can't find out what is really wrong with the property.
Have you inspected every single unit? I don't mean hired an inspector, but looked at them yourself. If not, then why not? If the seller doesn't want you to bother the tenants that is fine, but if he doesn't want you inspecting the premises, then move on. I've always said, "If someone is trying to hide, then they've got something they want to hide."
Don't get your heart set on the unit. Walk away from it. Examine other units and see if they are comparable in price and condition. Come back to it later if it is still sitting there. He may be more amenable to a more market driven price.
If you have any more questions, just ask. After all, the stupidest question is the one left unasked.
There is absolutely no possible way that $7k is going to make any meaningful impact on whether this property makes a good investment or not. Absolutely go in undernasking....but if your numbers work at X dollars, then they still work at X dollars plus $7k.
Thanks all, I really appreciate your comments.
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