How to negotiate when buying multiple properties from one owner?

Question

We're currently in the market looking at small multi's and we've come across a seller who has two duplexes listed. We've confirmed that they're open to considering a package deal for the two properties. We own the most recent and comparable comp on the market and got it for $25k less than what each of the properties is listed for. I'd love to know how to approach negotiating two properties at once, what we should be thinking about, how to make it appealing to them while being profitable for us etc.?

Additional info: We know they have several more properties in town so I want this to be a winning deal for everyone so that we'd be considered a go-to when they decide to list the others.

Additional info: We know they have several more properties in town so I want this to be a winning deal for everyone so that we'd be considered a go-to when they decide to list the others.

Justin Bauer · Answer

Find out what the seller problem is and try to fix it. They may not want to be landlords no more and would have such a big tax liability they are piecing there portfolio off by the year. Create value for them by giving them options. So many times its not about price its the benefits you can offer a seller.

Adam Tafel · Answer

This is a question we've been throwing around recently: in this market, who expects a premium (or discount) on a small package - seller or buyer? There are strong arguments for both. If only buying 2 I would be happy paying market value for each. @Jeff Schemmel grew up in Southern MN, I'm assuming you know the area well but he might be a good resource if you need one.

Andrew Garcia · Answer

Hi @Shane Farmer, if the numbers make sense at the asking price, I would go for it.

The relationship is worth more than saving a few thousand on the purchase price.

Lucas Miles · Answer

@Shane Farmer If both of them are listed, it would likely be easier for the seller to sell both at once, only have to deal with 1 buyer, close at the same time, etc. So really isn't any special negotiating you would have to do there, assuming you are able to close on both at one time. Make sure they know that you own other properties in the are, and that you will close.

For the other properties they own, see what their time-frame for selling the rest of their portfolio is, and why they are holding on to the rest. Work with them to figure out why they are interested in selling, and what way you could best help (buy 1 a year to spread out capital gains, buy all at once so they are done being landlord, etc).

Shane Farmer · Answer

Thank you. It's helpful to think about it this way. Ensuring that we build trust around the relationship definitely seems more important. Current numbers roughly work out to $450/mos cash flow and 6% CoC ROI.

Shane Farmer · Answer

We bought it back in October for $300k. The places are in Southern Minnesota, close enough to the cities that you get commuters and in a nice pocket community that has seen good growth and stays alive thanks to a couple colleges, which it seems would be feeders for the tenants in these places.

Bill B. · Answer

How long ago did you purchase and what is the price range?

$25k more than you paid might be a steal in a market with 20-30% appreciation if these are $150k properties. Especially if you purchased more than 3 months ago. An even bigger steal if these properties are more expensive unless you’re in a master with little to no appreciation whole the rest of the country as skyrocketed.

How to negotiate when buying multiple properties from one owner?

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