Creative Multifamily Purchase

[Sam Yin]

Hello BP Community.

This is the first time I started a thread. I have been lurking on the forum for about almost a year, reading, learning, and posting a few opinions. Now I need yours.

Background:

I dabbled in REI for many years but took it serious after discovering BP podcasts 2 years ago. I completed three 1031 exchanges last summer and I am happy with that strategy.

I decided to consolidate 3 smaller properties I recently purchased and 1031 them into another property. A 2-plex (purchased end of 2018) and two 3-plex (purchased summer 2020). They are set to close next week. The trade would double my cash flow.

Dilemma:

I made an offer on a 15 unit, with mix of 3/2s and 2/1s, that was a few blocks from my 10 unit, for convenience since I self manage. The asking price was 2.5M and I offered 2.25M, suspecting it will not appraise for more than 2.3M. The seller said NO.

I found another property about 10 mins away that was a 19 unit with 1/1s for 2M. It should appraise for that. I made full price offer, with the caveat that the seller will go 1031 his funds and purchase the 15 unit that rejected my earlier offer at full price. This is due to his previous refis of 1.7M and remaining stepdown penalty of 3%. I would agree to use the same Lender (which I have used 3 times last summer) and they could slash the prepay penalty for the seller.

I sent a signed offer last week on Thursday, with positive verbal agreements from all parties over the phone, but the seller has not signed it yet. Just found out an outside Agent is trying to swoop in with 2.1M promise.

Side note: this seller agreed to sell this to me last summer for 1.7M, but never pulled the trigger because he was scared he could not find an upleg.

I know that they play these games and often end up selling for the same or less than my offer.

I was wondering if anyone has experienced a similar triangle offer, where you negotiated an upleg for your seller to close a purchase of his property for you?

Does anyone know of any other way to close this deal or make it more attractive?

Are there tips or tricks I should know to seal this deal?

I came up with this creative agreement because i know i have a timeline to meet for my 1031 and the multifamily market is getting too hot. I would consider just purchasing the 15 unit at full price, but would likely need to make up the difference in appraisal to the tune of an extra 100K that I cannot spare. I still might but it depends on where the market goes in the next several month and if I'm still in the game.

Please let me know your thoughts and share your experience. If I'm missing something, let me know. If I'm treading too dangerously, let me know. I'm hoping to find out if the seller will go for this by tomorrow evening. My digging revealed that this outside Agent is a scoundrel that often does this. I know that this often happens in this business where people talk too much and off market deals get leaked to predatory Agents. I offered to allow 2 extension if needed to make the seller feel better for his timeline. I have no other contingencies since my 1031 are closing and I have been pushing to closing date to add time for myself.

Thank you all in advance.