14 unit off market…. Possibly seller finance?

8 Replies

I have never done an off market deal before, but as an agent I have helped others set up seller financing purchases. 

I have a 14 unit complex that I found driving around and sent a letter to the owner. Her parents owned the complex and passed away a couple of years ago. Her and her sisters own it now and she self manages it. There is definitely some needed repairs, and I doubt she is getting market rent in any of the units. She actually reached back out to me from my letter and we talked for about 20 minutes on the phone. Her sisters do not help with much and just look to collect their check. She’s not sure they would want to sell, but want me to give them a number. I don’t have any numbers on what she’s getting now for rent or any expenses. I plan to meet with her in person and build more of a relationship and discuss possibilities. 

I mentioned they may benefit from seller financing to continue getting a check, and she will not have to do anymore work. I definitely would prefer to do a seller financing deal. I’m trying to figure out what creative ways might make them more interested in selling. Any help? 

I am thinking some sort of small down payment and then a balloon in 10-15 years. I would probably be adding value and refinancing before then anyway. 

Any comments will be appreciated, thanks.

Originally posted by @Charlie Massey :

I have never done an off market deal before, but as an agent I have helped others set up seller financing purchases. 

I have a 14 unit complex that I found driving around and sent a letter to the owner. Her parents owned the complex and passed away a couple of years ago. Her and her sisters own it now and she self manages it. There is definitely some needed repairs, and I doubt she is getting market rent in any of the units. She actually reached back out to me from my letter and we talked for about 20 minutes on the phone. Her sisters do not help with much and just look to collect their check. She’s not sure they would want to sell, but want me to give them a number. I don’t have any numbers on what she’s getting now for rent or any expenses. I plan to meet with her in person and build more of a relationship and discuss possibilities. 

I mentioned they may benefit from seller financing to continue getting a check, and she will not have to do anymore work. I definitely would prefer to do a seller financing deal. I’m trying to figure out what creative ways might make them more interested in selling. Any help? 

I am thinking some sort of small down payment and then a balloon in 10-15 years. I would probably be adding value and refinancing before then anyway. 

Any comments will be appreciated, thanks.

Sounds like a perfect scenario for proper seller-financing where you own it.  No Land Contracts. 

Make sure there isn't a mortgage or loan on it. 

In my market I generally pay 100x monthly rent for a C+ class property.  110x if it's nicer.  I could do better if w/s were tenant-paid.  Here they are owner-paid. 

My pmt is generally about 1/2 effective gross income and I shoot for 10% down at 5% interest over 24 yrs.  Fudge the term around to a nice clean number. That's how mine ended up at 24 yr avg. 

Don't accept a balloon less than 5 yrs and again, own it day 1.  Good luck!

Definitely don't provide any numbers. It will confuse her more than help her make a decision. Opening up the opportunity for you to lose the deal...

I would set up some time to get some of her numbers (rents/expenses) so that you can provide a better picture to help with her decision. 

@Steve Vaughan 's right. This does sound like a pretty ideal situation for you - good luck! 

Agreed on both fronts. @Steve Vaughan is correct in that you should check public records for a Deed of Trust and see if you can't reverse engineer how much she owes unless she's willing to show you a statement. If there's a loan on it, seller financing isn't a great option unless you're able to pay it off and her take back the remainder, albeit with a % down.

@Long Dang 's idea is solid for collecting more information. More numbers could scare her away, so just provide how much, over how long, and I'd do a 5 year balloon. 5 Year balloons seem to be standard practice for commercial loans and it'll make it more reasonable.

Remember you can't make someone do what they don't want to do. If all else fails, get it under contract at a reasonable price and seek out financing. Leave a margin so you can wholesale the contract if need be. 

Thanks guys that helps. 

So an update.. She must have talked to a broker or something, and wants more than I what I was thinking. She is very knowledgable and understands how seller financing works so she would be open to something if the price is right. But again she is not listing it for sale because she really doesn’t need to sell it. What are some options you can think of that she would also benefit in her mind, but I might could get a lower price also? 

@Charlie Massey   There are other benefits to her like deferred taxes and as mentioned, not having to handle the maintenance.  But if she's not looking to sell, then they're probably not too bothered with landlording.  You can always continue to follow up to see if they change their mind.

The flip side of it too, make sure even if you can get the place at a discount, do the numbers make sense?  If all 14 units need updating, and throwing out a number of $10k per unit, that's $140k you'll have to come up with.  Being a commercial investment property, lenders don't do 2nd's on them (the seller will have a 1st position mortgage), so you'll need to come up with that.

The above posts are pretty spot on for seller financing: 5% interest, 30 year amortization, 5-10 year balloon are the standard terms I offer when buying with SF.

Make you check insurance quotes too, definitely pretty high for a commercial policy.  I have a 5 unit and it's $3500 per year.

Good luck!

Originally posted by @Charlie Massey :

Thanks guys that helps. 

So an update.. She must have talked to a broker or something, and wants more than I what I was thinking. She is very knowledgable and understands how seller financing works so she would be open to something if the price is right. But again she is not listing it for sale because she really doesn’t need to sell it. What are some options you can think of that she would also benefit in her mind, but I might could get a lower price also? 

So you just completely blew over what all of us said and are back for more? Because a broker is involved, trying to make you broker. Ironic.  You're on your own from me. 

Originally posted by @Charlie Massey :

@Steve Vaughan

Just looking for more creative ways to figure this out for her to benefit and me to benefit at the same time… 

So the correct answer is yes, you dismissed all previously said by everyone. Got it.