All Forum Posts by: Rod Khleif

@Tim Zajicek

Hi Tim, for the most part those are good seller financing terms. The one aspect I'd negotiate for is to increase the balloon to 7 or 10 years. 3 or 5 is too short. If the seller pushes back I'd offer a higher interest rate if the numbers work.

As others have mentioned try to determine his motivation for selling and for a short balloon. The more you know the easier it is to create a win-win.  

@Freddie Williams

Hi Freddie, getting a 0% down seller finance deal is not unheard of. Without knowing any details of the deal, I'd suggest you see what you can do to make the monthly payments more attractive for the seller. For example if they are asking for 10% down and 5% interest, you can offer 0% down with 6.5% or 7% interest if the numbers work.

If you don't already know, figure out the reason the owner wants to sell and focus on solving their problems and building a strong relationship. It's possible, but it needs to be a win-win for both you and the seller.  

@Rebecca G.

Hi Rebecca, finding a great multifamily specific broker is worth it's weight in gold and they can quickly become you're most valued team member. There's been a lot of great advice already mentioned above, but I'll still chime in with a few pointers.

- Have a very specific investment criteria outlined before speaking with anyone. Instead of saying "we're looking for 20+ unit properties in Atlanta" say "we're looking to acquire 10 - 30 unit class C properties with light value add on the West side of town"

- Find and focus on a broker that specializes in what you're looking to purchase. A broker who focuses on 100+ units won't serve you as well as one who specializes in smaller properties

- Show you're serious right off the bat with a proof of funds, real estate "resume" of your past/current holdings, etc.

- You can look on LoopNet for who has the most listings. Another great resource is local property management companies. MF is a team sport and everyone will refer you to who they think is best

@Michael O.

Hi Michael, you'll definitely find more wholesalers focusing on the smaller properties, but wholesaling a larger property (50 units +) is not unheard of. 

@Armand P.

Hi Armand, I'd also suggest looking at small residential properties 2 - 4 units. You can potentially find a small commercial property depending on the market.

If you're researching the whole country and very flexible with where you'll be investing I typically advise considering one of these four markets first if possible:

1. Your backyard (home) market

2. A place you know very well, often where you grew up

3. A place with boots on the ground (family, friends, etc.)

4. A place you'd like to vacation to/retire 

@Guy Azta

Hi Guy, first things first take @Hadar Orkibi's advice and have lockboxes put on the vacant units so contractors can access the units without the property management company onsite to let them in. Waiting weeks for access is costing you money everyday as those units could be leased by now.

Secondly, it sounds as if the property management company isn't too motivated, which is often the case on smaller properties. I'd suggest you ask them what types of properties they primarily manage. For example if they're exclusively managing 50+ or 100+ unit properties in the area your 12 unit will surely be put on the back burner.

I'd also suggest the following:

- Reach out to a few of the top brokers in the area and request a referral to the best property management company for 50 units and under.

- Locate some similar properties to yours (10 - 30 units) via the assessor and reach out to these owners. Ask them who they're using for management, what contractors, etc. Remember this is a team sport. Worst comes to worst they may even want to sell you their property!

@Ryan Weddle

Hi Ryan, first keep in mind that 2 - 4 unit properties are usually not valued via cap rates or NOI. 2 - 4 units are residential and are valued based on comparable sales. That is one of the negatives of buying four units or under. You can't drive value by improving the NOI. Unlike 5 plus units which are considered commercial.

The factors that effect cap rates include:

- Location of the property

- Overall market condition

- Supply & demand

- Investment risk

- Property appreciation

- Level of property management

- Tax benefits associated with the property

The primary factor is stability. Class A & B properties in a primary market have low cap rates because they're less risky than a Class C or D property. 

@Matthew RUSINAK

Hey Matt, when first exploring new markets there's a few primary things I like to research right away. Focusing on these will allow you and your partner to quickly decide if a market is worth pursuing or not.

- Employment growth

- Population growth

- Top 10 major employers

- Not a "one horse" town

- I like to see a median home price of $80,000 or more

- Low unemployment rate

- General safety

Once you start to dig into your target markets I'd then suggest to do more advanced research and call the local chamber of commerce, economic development office, etc. as well as do research on market rents.

The following sites are great to use for your initial research: bestplaces.net, spotcrime.com, city-data.com, bea.gov, & bls.gov.

@Lynzie Mackey

Hi Lynzie, just like with single family homes the saying "location, location, location" applies to multifamily as well. Put yourself in the shoes of prospective tenants and the number one thing for them will be location.

Over the course of buying 2000 homes & apartments I've bought many properties in poor (D class) locations. Many houses I purchased often cost less than $5,000 and the tenants they catered to were such a headache I even donated a few houses for the fire department to train in.

Keep in mind location in the submarket will often dictate who you cater to.

Near downtown/jobs? You'll cater to young/working professionals

Near a university? College students

In the suburbs of a great school district? Families

Properties near the beach in southern Florida are often going to have low cap rates and not much value add. Don't be afraid to look inland to find some great deals.

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