Seems Too Good.....
Got a lead on a 9 unit (7 apts/2 store fronts) in a decent (and upcoming) neighborhood. 100% rented (and has been for some time). Rents coming in are around $4000. Maintainence and taxes, etc. are around $800 month. Asking price is 249,900. Am I missing something, or are these decent numbers. I know that the roof will need replacing, as it has had several patches over the last 5 years. This appears to be the biggest expense. Anybody have any thoughts??
Thanks commercialtalking- I went back to the 9 unit building to go through and my realtor tells me they dropped the price to 229000 from 250000. The "new wife" wants hubby to sell all his holdings (and he owns half of the city) so he can be at home with her. The building looks to be (by my estimation-and I definitely will get a 2nd on that) in great shape. Talked to three of the tenants and they say he has kept up the building very well. The appraisal is going to be right around 250,000-260,000. Been on the market 3 months. What is the best way to approach. How low should I offer. NOI is 27240. Total annual expenses are 10800. Total gross rents are 38040. This is info from the other realtor. Any thoughts!
Sorry Commercialking-spelled your name totally wrong. Apologies to you.....
Its Ok, tess. Lots of people would say I sound like a commercial talking.
Well its only a 12 cap which is a good deal but not too good to be true. Thank you for the better numbers. This is a range where a seller motivated by a beautiful woman asking to spend more time with him might reasonably sell.
If he just came down in price 10% I wouldn't necessarily push him a lot further, maybe another 5% price reduction. Plus I'd ask for a 30% second at 6% interest. This gives you a certain amount of room to negotiate on a second round.
I spoke with the realtor and was ready to make an offer. She states that the seller is absolutely not willing to carry back a mortgage. Is there any other solutions to coming up with the 20% without digging into my HELOC. I have the money there but ...( I am also attached to the husband who doesn't like to put out his money) . If I were to use our HELOC can a commercial mixed use property be refinanced quickly to pull $$ back out? Does the loan on commercial have to be seasoned like residential? I appreciate the help!!!
Make the offer in writing anyway. If you wish you can ask to be present when the offer is presented. The key here is to get "face time" with the seller. If you have a good relationship with a bank or mortgage broker you might want to include them on the negotiation.
Imagine this scenerio. You, seller, broker, your mortgage guy sit at conference table. You say you really want to buy the building but cannot do so unless mortgage guy will make mortgage. You make offer that mortgage guy has already said he can approve. Seller counter offers. Mortgage guy says he cannot get that deal through underwriting. You make another offer. Mortgage guy says no, even that would not do the deal. Pretty soon Seller and you are both trying to figure out how to do a deal the bank can live with. This make you allies against the common adversary, the bank. This is a very powerful tool as long as the mortgage guy is in on it and doesn't mind being the bad cop.
Thanks! You are a real pro!! All your info has been extremely helpful. My mortgage broker would have no problem sitting in and playing "bad cop"
Commercialking,
I am impressed with your negotiating tactic in here. I would never have thought of it, but I sure will use it.
Thanks.
The negotiating scenario isn't far from the truth.
Most deals that come across my desk that request unrealistic LTV's on commercial financing is because the seller 'won't take a second position.'
I think all sellers "say" this, as a motivator for the buyer to exhaust all financing possibilities. By the time the buyers comes back and says "I just can't get enough financing", the seller says 'ok, I'll do the second.'
I'd say this happens about 80% of the time. Many times I've called the seller directly and told him financing just isn't available, and the transaction won't happen unless he takes back $x in a second. Most of the time, after he hears from me, the seller goes with the deal.
Don't be shy about involving your lender in your transactions.
Thanks, guys for the nice comment about this tactic. Let me say one more thing on the issue, and that is to agree with Decision man. The reason this tactic works is because it is true. The lender in the room doesn't have to beat the seller up any further than necessary. He simply says, "I can't get that done." Until it gets to the point where he can say, "Yes, I can get that done." He's not trying to get you a "better deal" he's just weighing in on whether the deal will underwrite or not.
As a rule in any negotiating scenerio it is a bad idea to lie, or bluff. People can tell when you are not being forthright with them.
The trick is to get the seller (or buyer when you are on that side of the deal) to tell you what they really want and why. Sometimes you can meet the why without giving them what they thought of as their "best deal".
Tess,
My first question is.... what else does he have for sale ??? It may be tough for you to do this one property but put it in a package deal and suddenly things get alot easier to finance. I would look through his entire inventory and try to put some things together that make sense. It seems hes ready to do some deals (with the lady friend and all lolol)