Real Estate Investor · Indianapolis, IN · Member since 2008 · 26 posts · 1 vote
Hi all,
out of curiosity, has anyone obtained multi family units using lease/puchase options. Anyone gained control of apartment blocks with LO s?
What were the main issues for you and was it successful. What made it successful or if it didn't work out, what was the fatal flaw. Do you have to own to profit from multi family properties?
I can imagine that there will be the suggestion that if a seller is willing to hand over his 20 unit to an investor on a LO then it has to be as rough as a monkeys a..! Or does it? I'd love to here from any who have done it, nearly done it or those that thought it all through and didn't do it.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
15y
Picked up 24 units with an option and master lease and pledged equity in other property with a financed option price. Then formed a LLC and transferred the contract to the LLC. Seller got a divorce, admitted one seller as a single person to 12 units. Admitted another investor and later spun off the other 12 units. The Seller bought me out three and half years later. Nice properties, no problems, old seller never left the office as manager. I made a spread, took tax benefits, a management fee with the other partner, a sale profit from both.
That is not true that a property has to be a dump. There are all kinds of deals that come about due to divorce, bankruptcy, death and estate settlements. It's finding a property, then finding out the real reason it's being sold, what the problem is, solve the problem, make money.
Another deal was an option, possession and master lease on three properties held by another investor. All properties were free and clear. Option price was basically making some repairs (contractor did it, I paid for it, but not much). Found a tenant who wanted to buy, changed my L/O to a Contract for deed and assigned it. Sold the other two properties retail.
This situtation came about because the landlord wanted to retire and not fool with properties, one of the main marketing methods I used. Usually CFDs.
It's recognizing what the problem is and knowing what strategy to use to solve the problem. Good luck!
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
15y
Haven't done it, but these are usually called "master leases" for multi-family properties. You lease the entire building then sublease the individual units.
Real Estate Investor · OH · Member since 2011 · 41 posts · 31 votes
15y
I have never been on the buying end of a deal but I have leased a 12 unit out with option. This turned out to be the worst real estate decision I have ever done. I finally got possession back after months of legal issues with several of the worst tenants you could imagine and most units were destroyed beyond repair.
I learned a valuable lesson on this deal. I did not get enough up front money from the lessee and would never make that mistake again.
If the deal worked out as planned it would be a great way for this guy to acquire control of the property. But instead of trying to run a decent business this person just skimmed the rent money and ran. Then when I tried to get possession back he destroyed my property. Oh well live and learn.
Real Estate Investor · Indianapolis, IN · Member since 2008 · 26 posts · 1 vote
15y
Guys, than you so much for you reply.
Jon, thanks for the heads up. I'll see if I can find some info on how these type of lease options vary from what might be considered normal residential lease options.
Jay, I am so sorry that these weak minded fools left you in the lurch. From your experience if I was to do business with someone like you regarding multi family units, what would you expect of me? Where you have been I am certain (unfortunately) others have been too and if I can give sellers what they need straight up I can avoid a lot of heartache on both sides.
Finally, is there no-one out there has obtained multi family units/apartment buildings using lease options?
Real Estate Investor · OH · Member since 2011 · 41 posts · 31 votes
15y
Robin,
If I were to do this type of deal again it would be on an individual case bases. I would however want to see a background in property management and enough money in the deal from the lessee/purchaser to at lease make it hurt if the deal did not work out for them.
I would also like to see a written plan as to how the lessee/purchaser would manage, improve, and general operating ideas that would improve the the property and increase the NOI and value so the lessee/purchaser could eventually finance the property and purchase the building outright at some point in time.
I think the concept of a master lease on an apartment building is a great way to get started if the numbers work out for both parties. I would do it again if the right deal came along.
I wish you well on your search for one that will work for you.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
15y
Picked up 24 units with an option and master lease and pledged equity in other property with a financed option price. Then formed a LLC and transferred the contract to the LLC. Seller got a divorce, admitted one seller as a single person to 12 units. Admitted another investor and later spun off the other 12 units. The Seller bought me out three and half years later. Nice properties, no problems, old seller never left the office as manager. I made a spread, took tax benefits, a management fee with the other partner, a sale profit from both.
That is not true that a property has to be a dump. There are all kinds of deals that come about due to divorce, bankruptcy, death and estate settlements. It's finding a property, then finding out the real reason it's being sold, what the problem is, solve the problem, make money.
Another deal was an option, possession and master lease on three properties held by another investor. All properties were free and clear. Option price was basically making some repairs (contractor did it, I paid for it, but not much). Found a tenant who wanted to buy, changed my L/O to a Contract for deed and assigned it. Sold the other two properties retail.
This situtation came about because the landlord wanted to retire and not fool with properties, one of the main marketing methods I used. Usually CFDs.
It's recognizing what the problem is and knowing what strategy to use to solve the problem. Good luck!
Full-Time Investor · Charlotte, NC · Member since 2009 · 2k+ posts · 1k+ votes
15y
i had an investor come to me with this idea on a 4 unit i used to own...only reason i considered it with him was bc i knew him, and he and his brother owned 50 plus rental units in the immediate area, so that gave me confidence...i don't let my tenants in an apartment without first month's rent and a deposit, so i'm definitely going to need a decent amount of money upfront to give someone else total control over a building of mine
Full-Time Investor · Charlotte, NC · Member since 2009 · 2k+ posts · 1k+ votes
15y
no,a business plan doesn't mean much to me sorry...i would want 5-10%..if you're looking for a low or no money down situation, your best bet is to target a motivated seller where you can decrease expenses, improve operations, and increase rents...good luck.
Specialist · Cleveland, OH · Member since 2011 · 1k+ posts · 852 votes
15y
A master lease is the way to do it if there is underlying financing on the property. Investors will do it if the time and circumstances are right. Dont give up, especially on smaller multi units. Just be careful, no one gives away a pot of gold!
Real Estate Professional · Dailly, South Ayrshire · Member since 2016 · 12 posts · 3 votes
10y
On a different note...
I was wondering about a multi well actually a six bedroom house split into two identical properties. I'd like to live in one and lease purchase the other. I'm wondering if this is legal?
I was wondering about a multi well actually a six bedroom house split into two identical properties. I'd like to live in one and lease purchase the other. I'm wondering if this is legal?
Linda, multi family dwellings are 5 or more living units, what you're looking at is a single family dwelling. 1 to 4 units attached are all single family.
As to legal, you need to check to see if the rehab or work done to make that a duplex met the zoning requirements and passed building inspections as required. I assume you are talking about two front doors to individual units, the building having 6bds.
And, this would have been much better in another thread, staying on topic, (I was expecting a post on L/Os) but it got my attention.
Rental Property Investor · Winslow, ME · Member since 2008 · 826 posts · 281 votes
9y
I'm considering using master lease to SELL some of my smaller properties (1-4 units each). For example, 1 bldg I need 78k for, it's a 2 unit, tenants pay 700 ea and includes heat (but not elec. or hot water). What are some "ranges" I might use for a deal like this? I'm thinking at least 5K lease option but I'm a little green as to who pays what, and how much to ask for each month. Any thoughts appreciated. Thank you.