Mulit-Family NOT for Sale but I want it!

6 Replies

Hi BP!

Two years ago I purchased a duplex (2-family flat) for rental purposes that is connected via a wall to a 4-unit that has been vacant that past 2 years, and apparently many more years prior to me acquiring my property. I know the property needs some work but fortunately the units are set up pretty much like mine which I've renovated so I have a good idea how much it would cost. The property is owned by a trust, an older couple is managing it, and is currently NOT for sale. I don't know the owners very well but did have to speak to them briefly over the phone on a few occasions while completing my renovation process. 

Here are some of my estimations and hopes in acquiring the property:

-I'm thinking to do HML to Cash-out Re-Fi finance (I've already talked to a loan officer and she is supportive of this approach) to acquire and renovate the space to then rent out

-There was a recent sale of a 4-unit a block away for $225,000 (which looked to need a little bit of work itself). I'm conservatively estimating renovation to be about $70K based on what I spent on my project (all major systems replaced + cosmetics + contingency).

-I want to offer $70-75K (or less if I can) for the property but I don't want to offend them either. 

-Using the Rental Prop Calc, I would be looking at about looking at about $900 in cash flow after mortgage, expenses, reserves, etc.

I'd like some feedback on how to approach the owners and also if this deal is makes sense based on the little I've shared. Should I send a letter, give them a call, or go to them in person? I've fairly young and am told that can be used as an advantage when speaking with an older owner. Thanks in advance for your feedback!

@Kiara Walters I haven't analyzed the numbers, you seem bright enough to do that on your own.  You say you know the owners, although not very well.  Approach the owners directly & let them know you're interested in the property.  I wouldn't make an offer right away.  I'd use my ears & listen.  

A few weeks ago one of our property finders sent us a potential deal in Evanston Illinois.  We called on the owner who is in her mid to late 70's.  I said I was interested in potentially purchasing the property.  1 hour later & I'm still on the phone listening.  I never made an offer but now we know what she needs & during our next conversation I'll propose something that hopefully satisfies both of us.

Good luck.

@Crystal Smith , Thank you so much for the feedback! I think that's a really simple approach and take pressure off of me and, as you mentioned, it will allow me to see where they stand and where I can possibly find a win-win for us both. They don't live very far from me so I may ask to come by in person to chat for a few. 

@Crystal Smith That is great advice!

@Kiara Walters I think you're on the right track!  I am very interested in the outcome of this opportunity.  How did you arrive at 70k as your initial offer preference? 

Does your subject building contain 2bed/1bath units or 1bed/1bath units? Are you including the signature "enclosed porch" feature that a lot of the small mutli-units have here in DC?  I am personally guilty of this as well..........  :-)  These factors have significantly impacted my construction costs.  

@Philip E. , the units, I believe are 1br/1ba just like mine. In regards to your question about the enclosed porch, it doesn't have one. It's set up pretty much the exact same way as my current 2-unit and I have all my costs documented on that project where I touched almost everything (roof, electrical, appliances, flooring, furnace, water heaters, etc) without gutting it out. 

My thought process to come to $70K is this:

- I was told that in order to re-fi with a bank I would need 70% LTV

- Most HML will fund up to 65% LTV

- I would like to have enough financing available to cover the purchase ($70-75K or less), potential repairs ($60-75K or less) and ideally a few thousand to cash-out on the re-fi to re-invest

-I have a cash flow goal of a minimum of $200 per door and I believe the rental calc on BP is slightly conservative since what I actually get on my current property is more than it suggests when I plug it in

This is all wishful/ FAITH thinking (with the exception of the estimated repair costs since I know the costs based on my own project) and what's the hurt in that. The worst they could say is No to the idea of selling let alone my offer price. I just want to go about it respectfully. The units I purchased already where owned by an Estate and the owners really were trying to unload it because none of the young people in their family were interested in taking it on. Though these are different owners, it's also in an estate so hopefully they will be in a similar situation. 

@Kiara Walters, Clearly, you have done your homework!  It appears you're in a good place for evaluating the seller's circumstance for deal propositioning.  Please be sure to update here on the forum!  BP nation would definitely benefit from your experience! 

Happy Investing!!

@Philip E. , thank you! I will definite update the community and looking forward to sharing great news. 

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