For Sale by Owner- Broker?

Question

Good morning,

Still a newbie but I've found a four in my area that is "For Sale By Owner" that my initial underwriting, from the info I can find, shows it to be a property that would fit my CoC and CF criteria. I'm not sure if I should reach out to the seller directly or if I should work this through a broker. I'm curious how some of you found your brokers and what the process was like of interviewing? If I call the seller directly, is it taboo to start asking for financials or should I just ask if I can send them an LOI?

Steve K. · Answer

At the very least I’d get an experienced agent’s opinion on pricing because most FSBO’s are priced unrealistically high in my experience.

Chris Seveney · Answer

I have reached out to sellers FSBO in the past and just went straight through them. It is ok to ask for financials etc. may need to sign a NDA or make an offer based on what you think the financials are and then adjust. Where a broker comes in very handy is handling the offer and the transaction. Are they 100% necessary - no but make life easier. No matter what though always go through a title company if you close.

Gino Barbaro · Answer

@Tyler Kesling

Contract services and supplies are specific to the market, as maintenance, with labor. The strategy depends upon your scale. Either an in house maintenance person with HVAC certification or you have to hire out subs for the various jobs.

You can always contact PM companies and ask them what they budget per unit for maintenance

Gino

Tyler Kesling · Answer

@Steve K. I've got access to some realtor friends that I could probably get some comps from. I don't think they have the drive I'm looking for as I try to build and grow a portfolio so I don't think I'd trust them to build a partnership with but, yes, that's probably a good idea. The sign says $200K OBO and somewhere I read the owner and his wife have moved to Ecuador and just done with being long distance landlords. If income, expenses, and comps look legit, I'm thinking about $160 and hoping I can land it somewhere around $175K. I'm in a very small market where the average house price is only about $140K. Recently sold MF on Zillow are pretty much inline with the asking but I will definitely get a professional opinion. Thanks for advice.

Tyler Kesling · Answer

@Justin Moy @Gino Barbaro Thanks for the advice, and the link, guys. I think I will just reach out directly and work with a title company, if it goes that far. I keeping forgetting that I actually had a SFH that I did a LTO and used a title company to close. Apparently it wasn't that big of deal since it didn't make an impression on me enough to remember I did that. There's a story there but anyway...

From what I've been able to lurk around and find out, apparently the owner has moved to Ecuador and very motivated.

While I've got you...They've got an asking price and a total monthly rent listed on the sign. I can estimate most of the cost, taxes, insurance, utilities, PM fees, and such and I know that should be provided in the expenses but when it comes to the actual maintenance of the property, what strategy do you normally use? From the looks of the sign, I'm not expecting there to be detailed reports on facility maintenance. Depending on what model I use, I obviously get a different DSCR. My financing strategy would be to HELOC the down payment and repairs then, as quickly as possible, do a DSCR to bring the mortgage together and lock in a lower interest rate. My little calculator tells me I should still be better than 1.25 in any scenario but just thought I'd check with some more experienced folks to have a better idea of what to expect.

Justin Moy · Answer

A broker could help especially considering you're new. On the other hand, a broker is also incentivized by you buying the property so their opinions of things could be a little biased.

If I were you I'd likely consider partnering with a more experienced investor instead of bringing on a broker.

But, if you choose to buy on your own then yes you can ask for financials directly from the seller. I'd ask for their trailing 12 month income statements (a T12) and a current rent roll to start your analysis

Tyler Kesling · Answer

How would you approach trying to find "the right" MF agent? Just hit up as many brokers in the area as I can find and have them refer MF agents? I've got plenty of information on questions to ask but how did you interview your first brokers?

Caleb Brown · Answer

With you being a newbie it's not a bad idea to consider bringing in a broker that deals with MF. Yes you can go direct but being your first deal you want to have all your ducks in a row. If you go solo use a title company and read the contract, understand deadlines/timeframes. Also do inspections :)

Michael Dumler · Answer

@Tyler Kesling, if it's an FSBO, the owner is likely not going to pay the broker commission fee, which means that it will be added to your cash to close. Nevertheless, this conversation will need to be had with the seller for clarity. If this is your first transaction, I would advise working with an experienced agent. As noted above by Chris, they'll be able to help with the offer process and provide a sound purchase and sale agreement for use.

For Sale by Owner- Broker?

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