Looking for Owner Financed Multi-Family Properties
Property Manager · Tacoma, WA · Member since 2016 · 197 posts · 112 votes
I'm just trying to give you a reality check, not trying to offend you. My offer would be just about the bare minimum a business owner would ask for. Telling me I look into numbers too much is almost offensive, and throws up many red flags.
I poured my life into my business, why would I just give that away to someone so they could make money? That's basically what you're asking for. If you're proposing something like this you need a new angle. Like for example, my angle goes like this, "How much are you making in rents per month, let me double that." Then turn it around on them, and demand owner financing and pay them the double the money they are currently collecting after they agree to talk with me. Something like that.
I'm telling you this because your margins are going to be crazy slim, for the simple reason that no one would offer you anything less than 9% interest on 9% CAP. 9% APR on a $1M is $90k before other operating expenses. You're going to have a mountain of skeptics asking you how you're going to cover your costs, let alone make some money.
Your niche should be focusing on how you can make more money than an existing business, have a plan and then focus on the owner financing. How are you going to do a better job than an owner who has been wrestling a property into a business for the past however many years? These are all questions a business owner will ask you, so be ready.
Let me ask you some serious questions.
Why would someone owner finance a 9% CAP at anything less than 9% APR? Wouldn't they just lose money instantly? Why wouldn't they just pay a PM some peanuts to manage that property? For 10-15% down??? No price limit?????? I can get you a property for $24M, but how are you going to pony up ~$2.5M?
If you're interested, I would demand 25% of $1.5M @ 7% with a 10 year balloon for my own 9% CAP. Plus a background and credit check, and at least 5 references from local business owners, to ensure that you don't run my business into the ground. The only reason I would agree to this is because I'm tired after starting my business from the ground up, and need a 10 year vacation.
That's just me though. Good luck!
@James Marszalek - $500K to $10M is a huge range. Also if you have 10% to put down on a $10M property ($1M) it makes me wonder why exactly you are seeking seller carry at all? You can debt finance up to $5M, using a commercial lender with out the seller's help. Also if you used a debt/equity stack you could probably also bring down a $10M property without significant seller carry and get properties that are better performing. I'd be happy to help you sort out a solid buing strategy here if you like. Please feel free to reach out me.
@Nathan Click @Account Closed
I think you both read into the numbers a little too much and made a few assumptions about what I'm doing that aren't correct. First, let me clear the room. The purpose of this post was to get multi-family sellers in front of me. I need properties to analyze, and the MLS doesn't have enough of what I'm looking for.
Yes, it's a big range. I wanted to keep it wide because anything is a possibility. Someone looking to part money looks at options. Again, casting a wide net to catch as many sellers as possible here.
Another assumption is that, for the right deal, financing wouldn't be used.
Guys, I'm sure I don't need to tell you, every deal in Real Estate is different. Having someone come to the table open to owner financing keeps my options open. When the deal comes across my desk, then I have the ability to use the right tool for the right job. You're looking at the broad view here, but asking me to consider specific tools. I'm not at that point yet. Show me deals first, then we'll talk about what's right and what isn't.
Either way, thanks for both of your posts.
I'm just trying to give you a reality check, not trying to offend you. My offer would be just about the bare minimum a business owner would ask for. Telling me I look into numbers too much is almost offensive, and throws up many red flags.
I poured my life into my business, why would I just give that away to someone so they could make money? That's basically what you're asking for. If you're proposing something like this you need a new angle. Like for example, my angle goes like this, "How much are you making in rents per month, let me double that." Then turn it around on them, and demand owner financing and pay them the double the money they are currently collecting after they agree to talk with me. Something like that.
I'm telling you this because your margins are going to be crazy slim, for the simple reason that no one would offer you anything less than 9% interest on 9% CAP. 9% APR on a $1M is $90k before other operating expenses. You're going to have a mountain of skeptics asking you how you're going to cover your costs, let alone make some money.
Your niche should be focusing on how you can make more money than an existing business, have a plan and then focus on the owner financing. How are you going to do a better job than an owner who has been wrestling a property into a business for the past however many years? These are all questions a business owner will ask you, so be ready.
@Account Closed, at the end of the day, I respect your position. But I have nothing to run the numbers against. I need properties to look at. Any numbers I threw out there were just ballpark, to give people an idea of what I was looking for.
I hear what you're saying though. I'll take all that into consideration.
No worries, I'm just your target demographic, although I'm not in your market or looking to get rid of my place. Those would be my thoughts if you approached me.
If you've got even $200k you can put a duplex on an owner financed lot and make it cashflow nicely. I've heard of lots being owner financed, and occasionally a very run down property, but never a multi-family with a decent CAP on it.
A lot of owner financed property tends to be borderline scammy. I'm not going to even go into that, so I don't give any "entrepreneurs" any ideas on these forums. Be careful with them. One missed payment, and your business is gone. Doesn't matter how much you've put into it.