Approaching an owner that is not actively seeking to sell property

Real Estate Deal Analysis & Advice
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Approaching an owner that is not actively seeking to sell property

Brandon Lee
Salt Lake City, UT · Member since 2014 · 5 posts · 0 votes

Hi All: 

I am seeking advice for the following scenario: 

I bought my first two rental properties this year and there is a property that is "abandoned" (not currently occupied) next door that the owner only uses to store stuff in the backyard.

It is not a legal duplex, but it does have two apartments (one is an accessory dwelling unit, so requires that the owner occupy one of the units). I am interested in purchasing the property and flipping it. 

My property manager has spoken briefly to the owner (saw him next door one day) and he expressed some interest in the possibility of selling it. I should note that I have not seen the inside of the property to date.

Two questions: 1). How do you suggest I go about contacting the owner? Any particular strategies you suggest? I have used a realtor to purchase the other two properties via the MLS, but this is not even a listed property and I am interested in pursuing this one myself.

2). Can you provide some advice regarding valuation of the property? I have information from the city regarding property valuation, but not sure how accurate that is. Can you provide some thoughts regarding how best to go about this? 

Many thanks in advance for any help!

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  • Gerald Harris
    Investor · Atlanta, GA · Member since 2013 · 922 posts · 336 votes
    12y

    You can send him a Yellow Letter or just get his contact info and approach him.   You mentioned your property manager briefly spoke to him and there is some motivation.   This is a good thing.  

    to value the property you can use mls comps or use

    http://findcompsnow.com

    its been pretty good to me.   If the property has portions of it that are unpermitted then you can't consider that value until you bring property back up to code.   

    Also, go down to the city and check and see if there are any code violations against the property.    Code violations can be a great negociating tool to get a better price.  

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  • Nuhan Demirkan
    Rental Property Investor · La Plata, MD · Member since 2011 · 216 posts · 117 votes
    12y

    Brandon, congratulations on deciding on pursuing the deal yourself. Developing the skill of negotiating directly with sellers on off-market properties is one of the best skills you can learn in real estate investing. I rarely buy listed properties anymore. There are a couple of ground rules, be honest, be open and be sincere. The deal is not going to happen unless both parties are happy with it. And it is a process. Don't expect a one call close. Keep the dialog going, as long as you two are talking you are in the game. 

    Find out if there is motivation on his part to sell. If there is it is a quicker process.

    You can contact him thru direct mail, his mailing address should be on the tax records of the property you are interested in. You can call him, ask the neighbors if they have the number. Or you can visit him if they are local. And the reason for your letter, phone call or visit is "I want to buy your property. Will you entertain an offer?"

    If you can't cut a deal at first keep in touch at least bi-monthly. Life happens to people everyday. Make sure he has your contact info in case he has get rid of it fast.

    The valuation will come from the comps in the area. Look at what other properties are selling for after repair and what the investors are paying for them. Or you can use the formula of ARV (After Repair Value) x 70% = purchase plus rehab cost.

    There is a lot of information on Biggerpockets on this topic. Dig in...

    Good luck

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  • Bruce L.
    Seattle, WA · Member since 2014 · 44 posts · 4 votes
    12y

    If the owner has no interest in selling at the moment, and we keep in touch bi-monthly, would that make us seems pushy? I know it's a case by case scenario, just asking in general.

    Is there any good resources on negotiation? how to talk to the seller from an ok deal to become a great deal?

    thanks.

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  • Nuhan Demirkan
    Rental Property Investor · La Plata, MD · Member since 2011 · 216 posts · 117 votes
    12y

    Again be open, ask him if it would be OK for you to keep in touch to see if he changed his mind. He'll tell you.

    Check podcasts on negotiation. There are many ways you two can come to an agreement. But first you have find out what it is he is interested in. He may want to go to Florida for a month or need a new car, whatever that motivation, if you can help him achieve it you can get yourself a deal. Figure out what it is you want and can you give him what he wants within those parameter. If not check back later to see if things have changed.

    This is a long road but the good news is you're heading the right way. You are sure to make mistakes but you are also sure to be successful.

    One more thing, don't be seduced by the quick cash of flipping it will only make you rich. Holding assets that appreciate in value will make you wealthy.

    Keep it up.

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  • Brandon Lee
    OP
    Salt Lake City, UT · Member since 2014 · 5 posts · 0 votes
    12y

    Gerald: Thanks for the encouragement an suggestions--very useful. I will definitely check with the city for violations. And thanks for the website link to consider valuation. 

    Nuhan: Great suggestions regarding how to approach the potential seller and thanks for the nod toward thinking about valuation. I will have a closer look on the forums. 

    Thanks to both--very useful and much appreciated!

    Brandon

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