How to buy a FSBO property

Question

Hi I am in Broward County Florida and after doing some driving for dollars, I found a FSBO For sale by owner triplex 3 unit, that is not listed on the MLS and would like some help on finding the best way of obtaining this property. This will be my first investment purchase of which I plan on house hacking.

After briefly speaking with the owner in her front yard, She said she has a mortgage with about 60k left on it and would like to sell her house as she no longer wants to deal with tenants, water bill, maintenance, etc. All tenants are on month to month lease. She said she will sell the property for 225k. The property needs some repairs so I believe the there is room for negotiation. She said she can't pay the mortgage and her only options at this point are bankruptcy, foreclosure, or loan modification. She I would like to purchase this with an Fha mortgage of which I have been preappoved for.

Can any please guide me going forward? I'm not sure what my next step is in pursuing this deal.

Thanks.

Courtney Merricks · Answer

@A.R. Coningsby this is a great find if the property is located in the area you want to be here in Broward... First you need to find out what the properties are worth in that particular area. What is the estimated rehab? Run your numbers with the BP Rental Calculator to analyze the property to see if the numbers work. Once you have put all of your numbers in, the calculator would tell you what you should be paying for the property. Keep in mind, with FHA the property has to be livable for all tenants. There can be minor rehab that need to be completed, but no major rehab. Also, make sure you check to see if the rents are under market; if they are under market, you should be able to increase the rents after you acquire the property and rehab it. Thanks to @Jake & Gino, LLC with Wheel Barrow Profits, they speak about RUBS, which you may be able to bill the tenants back for the water which could also increase your profits once the property has been rehab. When running your numbers, make sure you include the property management fee as well even if you decide to manage the property yourself. Great Find... Keep up the great work!

Adam Schooley · Answer

@A.R. Coningsby If you need help please feel free to contact me.  I'm an investor and an agent and know the market very well.  I'm currently helping a few BP members who are new to the multifamily market here in Broward county.  I house hacked a duplex in 2015 in Fort Lauderdale and know what to look out for. Good Luck regardless and I hope you get the deal done.

A.R. Coningsby · Answer

@Marcus Auerbach thanks for the reply.

I guess we all have to learn someway or another....your right though..... you've got to smile about it at the end of the day.

That is obviously my biggest reservation going forward....not handleing my first deal in a financially beneficial manor. What are some big moves that you would change if you had to buy your first investment over again?

I don't know if I want to wholesale the property as I'm sick of paying rent, would like to more experience as a landlord, as well as build equity using the "Brrrr" strategy.

How do you recommend I go forward in finding someone who is familiar with fsbo? Any better ways than just hittin the phones for hours?

Thanks.

A.R. Coningsby · Answer

Thanks @Courtney Merricks, I have yet to walk inside the property as it was late the other night I was there. I have been actively useing the rental property calculator with conservative numbers, as I am not an ARV expert quite yet doing comps on my own. I have done some minor back and forth with owner via text and my next course of action is to walk through the property. With the exception of the kitchen, bathrooms and roof (which I'm told was recently replaced), what are some other red flags I should look out for?

Thanks for the tip about the Fha tentant living environments as I will take this into consideration when viewing the units. I will also read up on the Fha requirements for tenants. Are there any FHA tenant requirements that stick out in your mind that I should absolutely not overlook?

The rents are slightly below market and the management has ALOT of room for improvement which I plan to rectify as tenants are on month to month.

I have read a little about RUBS in the past and plan do plan to utilize.

A.R. Coningsby · Answer

I've been doing some reading and I think wholesaleing the property would be illegal in Florida because I am not "liscenced" to broker the deal. I also do not have a buyers list. I'm sure there are loopholes but I am just not familiar at all with wholesaleing.

I would like to buy the property and be an owner occupant, do the majority of the rehab myself useing the brrrr strategy. Multifamily Comps in the area are around 250k and have been rising.

Also when doing my comps should I only be looking at other multifamily properties as well? Or should I use sing family properties with similar square footage as well?

When taking on a partner how do make sure that I don't just get pushed out of the deal I found. Are there usually NDAs that get signed in situations like this before even giving a potential partner the address? As I cannot compete with all the other cash buyers down here in south Florida?

Benoit Malige · Answer

Good find! Should you decide to wholesale it or partner up, PM me. Have you figured out the comps yet?

In any case, good luck!

Marcus Auerbach · Answer

@A.R. Coningsby

Find a partner!

If you don't have the experience you stand very little chance to bring that deal across the finish line. I have been there many years ago straight out of the bootcamp and let's just say the results were not that great (zero). Looking back I can only smile about my attempts.

You have two options: you can bring on an experienced wholesaler or you can hire an agent. In both cases make sure that the person is skilled and experienced in particular with FSBO's. It takes a while to get good at it and in the beginning your conversion ratio is not that good. You want someone who does 50+ deals a year. If it's an agent make sure you ask them how many FSBO's they call on every week and how many they end up listing. If the agent is an investor that's a plus, because then he/she can help you doublecheck your numbers. Most residential agents don't know how to do that.

Financially it's probably a wash - you'll have to pay both the agent and the wholesaler. You will be able to negotiate more with the wholesaler, maybe as low as 5-10k. The agent will charge around 6% for what's called a single party listing.

From the viewpoint of the seller it's probably better to go with a agent, as he will be perceived more professional, by the book and perhaps a little bit more as a neutral third party (although it's really "dual representation without designated agency" in my State).

If you want to go the agent route feel free to PM me I'll hook you up with someone local who has the necessary skills! Good luck!

How to buy a FSBO property

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