multi family deal need expert help for offer.... - Posted by Dr Tim

Posted by J(FL) on April 24, 2003 at 07:14:13:

Another short answer - Pass.

multi family deal need expert help for offer… - Posted by Dr Tim

Posted by Dr Tim on April 23, 2003 at 15:01:02:

Got back from the CRE convention and started to look for multi unit with motivated landlords. Found a diamond in the rough, but need help. I located a 4 plex in a good neighborhood, that is in need of some serious landscaping and exterior work, and I had an expired list of multi units , this one was one them. I called the owner and he said make me an offer. I assumed all units were rented out. Got to the place expecting to just see one unit and found out that 3 were not rented out. He had evicted all three units. The inside still wasn’t completely rehabbed, although he did do some painting and minor work on the floors like tearing out old carpet, exposing the hardwood. the furnaces are all original when the units were built in 1961, the backyards are awful , needs serious landscaping. appliances are not new, don’t know if they work. roof apparently was replaced by him and his brother-in-law five years ago, but who knows if this is true. He has absolutely no financial statements, no operating expenses to show me, nothing. One unit he says is on a year lease at $600. He said last year he was getting $650. This guy just got divorced and has $80,000 racked up on this credit cards in debt from his wife, and he really seems stressed out. I asked him if he would be willing to carry a note, his reply was I am paying 24% on my credit cards why would I want 8-9% note, so no seller financing. I asked him after I established a good rapport with him what the lowest he would take on the units, he said it was appraised at 200k not long ago ( okay show me the appraisal right?) and he would take 190k. I left it at that, told him I would have to do some thinking but did tell him that I would have a hard time valuating this property without financials and income coming in. He has owned this for 10 years, I believe he paid 110k then, I didn’t get into the equity today on this first visit, but I need to find that out. How do I make an offer on this property with no NOI to show a lender or the owner to justify my offer. I know this guy wants to payoff his credit card debt, how can I negotiate this deal. I do have access to a 200k line of credit, right now I have a 100k line but am asking for 200k. Shouldn’t be a problem. This place needs to be inspected, and I am not sure exactly what it will cost for improvements, but I also know that it is still vacant and that can be for awhile. Someone help me please.

Dr Tim

there’s a reason that this is… - Posted by David Krulac

Posted by David Krulac on April 23, 2003 at 21:09:18:

an expired listing. This is overpriced and junky and the marketplace told the owner so, by not snapping it up. Seller needs a reality check. Perhaps his divorce was caused by inter planetary mating, because this guy is not of this planet!

Around here multis are flying off the shelf as stock market money is looking for alternative investments. People are paying full price and settling quickly for multis.

This place is overpriced and needs a TON of rehab and proper management. Be sure to tally the rehab costs and subtract from any offer you intend to make.

Re: multi family deal - Posted by BrokerScott (Mich)

Posted by BrokerScott (Mich) on April 23, 2003 at 19:16:19:

Short answer- pass. Longer answer get some comps for the area and check out GRM (gross rent multiplier) and cap rates. Suppose that all the units were rented at $600/mo. and the going GRM is 75 for example. Then $600x4=$2400 then times grm of 75 for value of $180,000. Make an allowance for who pays what utilities. In a high growth area with the tenants paying their elec and gas might justify a GRM of 80 or so. This is useful as a ballpark figure to see if its worth doing cap rate. For more on that subject see Then after all that you need to figure how much it would take to fix up the place plus a percentage for your hassle. My view based on what you’ve written-this seller is trying to pass off his own incompetance to you plus demading a premium price and no terms. HA! this guy is clueless and thats probably why he got in this situation in the first place. Maybe someone else would see this differently but I would say no more than what I’ve indicated and since you have the line of credit you mentioned, use the magic work ‘cash’ and if he says anything but “oh thank you, thank you” just walk away. Best, Scott