Sellers unrealistic price

[Matt Pursley]

I’m working with sellers of a 6 unit. Agreed to seller financing for 15k down at 6% for 15 years. They’re asking 300k. Brings in 3250 monthly. The problem is they are unaware of actually how much work the property needs. It has quite a bit of liabilities that need to be addressed that they just don’t see as issues. They agreed to an inspection before the offer and I’ll receive the inspection work back today or tomorrow.

How can I make an offer that is going to be communicating why they have it overvalued without them just shutting the door on me? They seemed motivated but are starting to seem like they just don’t get the issues.

[Pat L.]

Agree, it doesn't have enough information to assess. But don't throw away a deal if it can be rehabbed into a healthy cash flow.

We picked up a 4 unit for $135k, listed for $199k (& at that he was taking a $40k hit) but 2 units had been vacant for a couple of years & the rents were very low. After some time on the market he jumped at our unconditional, CASH, close in 30. We knew each dismal 60's style unit had to be completely rehabbed, then a year into it we got hit with the need for a (town mandated) complete fire sprinkler system, fortunately I was 'permitted' to do it myself. After the rehab, our CoCROI is 20%+ & it's now a permitted 6-unit because the sprinkler system opened up the 3rd floor & I was able to split a large ground floor unit into 2 units by adding a kitchen in what was once a large mudroom with an equally large adjoining closet. This beast is over 6500 sq ft.

We knew the costs going in & the opportunity was there, so took a chance while many blew it off as a money pit. It has been challenging BUT it's in a high demand area, never vacant & rent for a 2 bed unit in the area runs $1100-$1400/month. We have also been Covid-lucky as ALL our current tenants are deemed 'essential' & are paying on-time. 

Good luck...