Multi-family exit strategies

15 Replies

Does anyone have a list of exit strategies that would work for multi-family properties in either a "lease option" deal or a "subject to" deal (subject to their existing financing)?

    Thanks,

                  Mike

Buying or controlling w the Seller - Owner

1. Lease option and assign

2. Lease Option and sandwich

3. Sub2 and no note

4. Sub2 and a note

5. Wrap - AITD 

6. Contract for Deed - Land Contract - Installment Sale w existing Financing

7. Installment Sale w Free and Clear - no mortgage houses

8. Master Leases for control

9. Master Lease w Option

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Exit Strategy

Sell for Cash

Sell For Terms

Sell w Partner

Sell the LLC

Sell on Land Trust

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@Ellis San Jose  

 @Rick H.  

What have I missed?

Medium banner reiskills 997   copyBrian Gibbons, REISkills | [email protected] | 818‑400‑3046 | http://MyREISkills.com

How about 1031 Exchange?

Originally posted by @Brian Gibbons :

Buying or controlling w the Seller - Owner

1. Lease option and assign

2. Lease Option and sandwich

3. Sub2 and no note

4. Sub2 and a note

5. Wrap - AITD 

6. Contract for Deed - Land Contract - Installment Sale w existing Financing

7. Installment Sale w Free and Clear - no mortgage houses

8. Master Leases for control

9. Master Lease w Option

````````````````````````````````````````````````````````````````````

Exit Strategy

Sell for Cash

Sell For Terms

Sell w Partner

Sell the LLC

Sell on Land Trust

`````````````````````````````````````````````

@Ellis San Jose  

 @Rick H.  

What have I missed?

 Is there a difference between #'s 4 & 5?

Originally posted by @Benjamin Cowles :
Originally posted by @Brian Gibbons:

Buying or controlling w the Seller - Owner

1. Lease option and assign

2. Lease Option and sandwich

3. Sub2 and no note

4. Sub2 and a note

5. Wrap - AITD 

6. Contract for Deed - Land Contract - Installment Sale w existing Financing

7. Installment Sale w Free and Clear - no mortgage houses

8. Master Leases for control

9. Master Lease w Option

````````````````````````````````````````````````````````````````````

Exit Strategy

Sell for Cash

Sell For Terms

Sell w Partner

Sell the LLC

Sell on Land Trust

`````````````````````````````````````````````

@Ellis San Jose  

 @Rick H.  

What have I missed?

 Is there a difference between #'s 4 & 5?

Sub2 you have a deed, wrap is not as strong as sub2

Medium banner reiskills 997   copyBrian Gibbons, REISkills | [email protected] | 818‑400‑3046 | http://MyREISkills.com

Originally posted by @Brian Gibbons :
Originally posted by @Benjamin Cowles:
Originally posted by @Brian Gibbons:

Buying or controlling w the Seller - Owner

1. Lease option and assign

2. Lease Option and sandwich

3. Sub2 and no note

4. Sub2 and a note

5. Wrap - AITD 

6. Contract for Deed - Land Contract - Installment Sale w existing Financing

7. Installment Sale w Free and Clear - no mortgage houses

8. Master Leases for control

9. Master Lease w Option

````````````````````````````````````````````````````````````````````

Exit Strategy

Sell for Cash

Sell For Terms

Sell w Partner

Sell the LLC

Sell on Land Trust

`````````````````````````````````````````````

@Ellis San Jose  

 @Rick H.  

What have I missed?

 Is there a difference between #'s 4 & 5?

Sub2 you have a deed, wrap is not as strong as sub2

 Ah. So...  the key difference is between having the deed in your hands vs it being with a trust? Thanks

For a multi-family, lets use a duplex in this example, is it possible to sell off one side and keep the other? Or sell off both sides to separate parties? What if the duplex isnt side by side, but main level and basement level?

Im looking at a duplex in Denver, CO if there are differences with the legality of this.

@George Wines That is doubtful, but depends on your city zoning.  In order to split the property up, you would have to subdivide the lot if it can be converted into a townhouse style side by side.  Your zoning would likely not allow for this.  If its up/down duplex, you would likely have to turn them into Condo's, which might be easier than subdividing.

Around me, I only see duplex's being split by means of turning them into condos, but its very rare, and they appear to have issues with selling as they stay on the market a while.

Originally posted by @George Wines :

For a multi-family, lets use a duplex in this example, is it possible to sell off one side and keep the other? Or sell off both sides to separate parties? What if the duplex isnt side by side, but main level and basement level?

Im looking at a duplex in Denver, CO if there are differences with the legality of this.

 We sell an APN(Appraiser Parcel Number) or a mortgage, not a door as in a condo.

NA Beard Not sure I understand what you are saying.  Admittedly I am only familiar with my area, but here the zoning dictates what I can do. The zoning limits where I can put a 2 family or 4 family or single family.  There are also min. lot sizes for dwellings, which would limit splitting.  I guess if the duplex was built on two legal lots (APN's), there would be a way to split them (or subdivide), but if its on one legal lot, I'm not sure it could be done.

I have never done a condo conversion (nor do I ever plan on it), but I have seen some older duplexes renovated and sold a condos. Some of this might have been due to zoning changes, as the area I saw them was changed to only allow SFH back in 2008, and these condo's were more recent than that.

Originally posted by @Mike Wood :

@J Beard ... I guess if the duplex was built on two legal lots (APN's), there would be a way to split them (or subdivide), but if its on one legal lot, I'm not sure it could be done.

You're right if two APNs, your good to go, but also need to verify each as its own mortgage.  If only one APN, then you will need a zoning variation, and from experience, they are no fun and difficult.

NA Beard Agreed.  Getting a zoning variance is not something I try and do.  Around here, it pretty hard to get one, and it depends on who you know.

Thanks for clarifying.

@George Wines , I'll chime in here, but @Mike Wood and NA Beard are right on.

As a former city planner in the Front Range, I can think of several legal issues preventing you from condominiumizing a duplex.  There's usually a party wall agreement, instead of CC&Rs that outline a commonly-held parcel with footprint or air rights to the units themselves.  A duplex condo would be notoriously difficult to mitigate disputes between two parties (there is no majority vote).  

You'll also be looking at separating water service (two direct lines and associated extra tap fee instead of one line that splits) and bringing the party wall up to fire code (2 hour separation throughout, even in the attic space).  Not to mention, the minimum lot frontages, lot sizes, or access to a main street (not alley) are hard to meet.

 It's a nightmare for future owners, and frankly, I've seen very few duplexes legally separated.

@Theresa Worsham lists issues that a zoning review would require and hence the difficulty in getting the variation :sigh:

@Theresa Worsham Thanks for adding.  The examples I saw were side by side duplexes, where there was one common wall that was likely easy to add the required fire separation. The properties were in New Orleans, so they would have been complete gutted (due to flooding by Katrina), and rebuilt totally.  Around here, separating service is not such a big deal (we do not have crazy tap fees or other extra fees). 

I did find it odd that they chose to turn them into condo's. But I am sure it had do maximizing the $ for the developer and the fact that they could not subdivide.  The zoning change could have played a factor, as the house was clearly rebuilt after the zoning change, and around here, if it was not rebuilt prior to the zoning change, it was no longer grandfathered in as a 2 family house (it would have had to been rebuilt as a single).

@Mike Wood and @Theresa Worsham , I really appreciate the responses. It definitely sounds like that subdividing and selling as condos would not be a viable option for an exit strategy with this place since it is an over/under duplex. Also, zoning/regulation sound like no fun and I dont want anything to do with them. Great explanations guys