Off market, no money down deal example

[Tyler Speelman]

Hello, 

I wanted to give back to the bigger pockets community and share the step-by-step process I followed to purchase an off-market, no-money-down deal. 

Step 1: Locating off-market properties. 

On my commute to work and while driving to other rental properties I looked for other multifamily properties, preferably properties that had some deferred maintenance and also had more than 2 units. After these properties were spotted I wrote down their address. 

Step 2: Finding the owner. 

Next, I looked up the address on the county auditor's website to figure out who the owner was. If it was owned by an LLC I then looked up the owner of the business by searching the business name at this website: https://businesssearch.ohiosos...

Step 3: Contact the owner. 

I then attempted to look up the owner's phone number by googling their name and phone number. If I couldn't find their phone number I would send a letter to the address found in step 2. 

The direct mail off-market letter example can be found here:  https://docs.google.com/docume...

Another example of an off-market letter can be found here: https://docs.google.com/docume...

*I reached a few owners on the phone and mailed approximately 35 letters to off-market MF property owners and one of them emailed us back a few weeks later stating that they may be interested in selling. 

Step 4: Analyzing the deal

The triplex had a gross monthly rent of $1,555. The residents were responsible for utilities. My father had a similar triplex approximately 15 miles away that he sold approximately 10 years ago for 200k. I also had a rental property a few miles away not in near as nice shape that rented for $650 for a 2 bedroom/1bath unit and had a ton of interest (>120 people interested). Based on that knowledge, I ran my numbers in the biggerpockets calculator with potential rents at $700/unit and a purchase price of 200K (I came up with this number based off a sales price from a similar property that my dad owned mentioned above and figured this was a pretty strong offer based on the seller's purchase price from a family member for 129,046 in 2014). I also had a rental property a few miles away in not near as good as shape (over a 100 years old) that appraised for 190K in 04/2021.

Step 5: Talking and meeting with the seller.

I spoke with the seller and learned that they really did not have to sell, but were ready to move on and use the proceeds to potentially build another house or building. The seller mentioned that he was worried about capital gains tax and wanted to sell before the end of the year (2021) due to concerns of capital gains taxes increasing. I mentioned paying the seller off slowly over time (contract for deed) or having the seller finance the down payment. The seller said he would be open to offers that would help him out with capital gains taxes, but mentioned that he would want all of his money by the end of 2023. I met with the seller and checked out the well-kept triplex (2 bed, 1 bath per unit) with attached garages built-in 1981. This property was fully occupied and essentially turn-key, the seller used to live in one of the units so the whole building was very well taken care of. He mentioned that he had others that had contacted him about the property even though it was off-market and that he would be showing the triplex to 3 other people.

Step 6: Making offers.

*Offer 1: $170,000 cash, no contingencies, can close in 2 weeks.

*Offer 2: $180,000 contingent upon conventional financing, no inspection contingency, must close before the end of the year.

*Offer 3: $190,000 seller-financed, 20% down payment ($38,000) due in 2 weeks, remaining balance ($152,000) amortized over 30 years at 5.5%, $863.04 monthly payment, balance due on 11/19/23, no prepayment penalty. No inspection contingency. *Seller keeps the deed in their name until the full balance is paid (contract for deed) allowing the seller to continue to use depreciation on the asset. Contract for deed with the terms above to be drawn up by an attorney prior to closing.

*Offer 4: $200,000; $150,000 contingent upon conventional financing and $50,000 seller-financed must close before the end of the year. Seller receives 8% per annum interest-only monthly payments ($333.33) on principal balance ($50,000) for 2 years, principal balance ($50,000) due on 11/19/2023. No inspection contingency. Promissory note for $50,000 paid to seller from buyer with terms above to be drawn up by attorney prior to closing. 

* All offers are without a realtor involved.

*All offers are good for one week.

The seller accepted offer 4! I gave multiple offers based off of Brandon Turner's advice to figure out the seller's true motivation. 

Step 7: Creating the purchase and sale agreement.

After they accepted the offer I then drafted a purchase and sales agreement which can be found here: https://docs.google.com/docume...

Step 8: Financing

The appraisal came back at 225K! I used a local bank that was able to finance 148k at 3.875% 5 year ARM, 20-year term. We plan to refinance the property into a long-term fixed mortgage after we pay off the seller. The bank agreed to wrap the closing costs into the loan. The bank required the seller's attorney to prep the deed prior to closing.

Step 9: Promissory note

I sent the purchase and sales agreement to a local attorney who then drafted up a promissory note with the terms included in the accepted offer. The promissory note was then signed, notarized and given to the seller at closing. 

Step 10: Closing

I got Covid shortly before closing, but still closed. We signed the closing documents outside of the bank on the hood of my Kia Sorento. Fortunately, it was a decent day for late December in Ohio. The cool thing was I did not have to bring any money to closing. There was no money out of pocket and I got 25K of instant equity. 

Hope this was helpful. Definitely no expert and still learning, but hopefully some of you find this useful and can pull something from this to use as a tool for a future deal and help propel you towards your goals.