Low Inventory Mutli Family Market, Finding First Deal

[Josh Cocker]

Hi All, New here! I am originally from UK and after 6 years I now qualify for funding and I am wanting to house hack a multi family (seems like a cheat code as it isn't an option on a residential mortgage in the UK) but the issue i am finding is the low inventory in my area (6 listings within 20 mile radius of Danville VA) and nothing that i think i can make cashflow well / or seems like it would rent to a decent caliber of tenant.

Any advice for finding / approaching owners for off market deals? 

I thought about writing letters and posting through the letter box of the nicer small multi family i see, but i understand the owner likely doesn't live there.

[Joshua Christensen]

@Josh Cocker

You're on the right track and congrats on such a move.  It's one thing to move across country but to change countries and culture is really a big deal.  

Honestly, two things I'd start with are

1. skip the banks - Get creative with sellers.  It's harder to find the sellers, and they are out there.  Zillow - For Rent by owner, CraigsList for rent by owner, For Sale by Owner, etc.  Do the leg work and you'll find them.  Then negotiate owner financing terms or a long term (3-5 year) lease with the option to purchase in a few years, then you can go to the bank to finance it once there is equity and no need for a huge down payment.  Sellers will often work with you if you can get them what they want.  Be creative.

2. Realtors with listings?  Look, I'm a broker and I make my primary living selling houses and small MF.  I often sell with owner financing options.  What is frustrating is when I list a property offering owner financing and "investors" come in wanting to put nothing down and ask the seller to pay for everything out of pocket.  First, the sellers typically have 8-10% of closing costs that need to be paid, typically from the down payment.  Realtors are Retail sellers.  Most don't understand how to structure investor friendly terms and avoid talking.  There are some, but you need to pay them for their work if the seller isn't going to be.  Most Realtors are not going to bend over for investors like that.  It's a lot of work to find those sellers and if its a sweet deal, most of the brokers will keep them for themselves or a close relationship.

 3. CASH FLOW - You can cash flow if you can structure deals, even in today's market.  I just bought an off market condo $25k below market value, fully renovated (by seller), with in place tenants who raised their rent to my standard before I closed giving me $300 per month positive cash flow.  They gave me the terms I offered with 5% down and 3.85% rate for 12 months.  That gets me in the door for the first year.  I'll refi in 12 months utilizing the built in equity plus what I earn this year to avoid a huge down payment.  Learn creative ways to cash flow that work for you AND also create a win for the Seller.

CREATIVITY HACK

One cool way is to offer a seller more than they are asking in exchange for a lower interest rate or offer a much higher price for a zero % interest rate for 3-5 years.  Ultimately the sellers get a bit excited about selling for a higher price.  Financing terms are more useful in building your wealth than only having one trick (lower price).  Imagine your tenants paying 100% towards the principal owed for 5 years.  That is a fast way to increase your equity when it's time to refinance.  

Best Wishes!