How do you convince an owner to sell?

Question

I've been following the forum for the last few months.  I have been looking to make the jump from SFRs to MF and researching and analyzing "potential" deals very diligently.

I have found what I would consider "a perfect MF deal" in a city I feel comfortable investing in.

This particular property is in a great location in a growing city with several large employers and higher education institutions.

This particular property is also currently rented way below market rent. Current monthly cash flows ~$50/unit and if I owned it, I would be looking to increase rent by up to 50% - resulting in cash flow ~$150-175/unit.

The property has been owned by a single person/family for 40+ years and from looking at the outside has deferred maintenance (and estimating the inside needs updating and remodeling as well).  Currently, owner occupied.

Now the problem, after speaking with the owner - they have no intent of selling - no surprise, they've had offers for years.  They plan to leave the property to their sons.

The way I see it my options are:

1)  Give up, take their word for it - it will not be owned by someone outside the family.

2)  Go by in another week or so, talk in person and just make sure my name and face are fresh on their mind if they ever change their mind.

3)  Try to talk to the owners and sons together.  Maybe the sons have no interest in continuing owning and operating a MF?

I feel like a win/win/win would be me buying the property, allowing the current owner to reside there (even rent free with the increased cash flow potential of the other units), and the family collecting a larger check if they seller-financed the deal to me....that could be my biased opinion though :)

Any input is welcomed and appreciated.

Thanks

Debra Grumbach · Answer

Move on. The owner is not a "seller" at this time. If anything, send them a monthly postcard in case they eventually decide to sell your name will be ingrained in their mind.

Salvatore Lentini · Answer

@Matthew Ries You need to move on and find a motivated seller.  You can't convince a seller to become motivated.  Not saying to totally give up.  Put it on the back burner and follow up with them twice a year, make sure they have your contact  info.  Don't wait for this one property and have it put blinders on you.  There are plenty of opportunities out there.  You may be able to get this one.... someday... just not today.

Matthew Ries · Answer

@Christal Warren I agree completely. This location, unit size, and potential for rent increase are all too good to just "give up" on.  I know they won't change their mind today, tomorrow, or even next week, but I do think sending reminders throughout the year(s) will be a good way to stay fresh on their mind.

@Michael

@Michael Le Thanks for the response.  Non-motivated owners - Yes, currently.  Non-capitalized buyer - sort of - I could have a 25% DP and private financing arranged very quickly, but all cash closing would take a little longer.  I think seller financing is an option for the seller to get a portion of cash up front + consistent payments over the life of the loan (win/win if they want to keep the cash flow, but have 0 involvement in running the property).  Below market price - not exactly - I wasn't looking to "steal" this property from the owner.  This is a very appealing deal given the room to raise rents, even at a fair market price for the units (in their given state,  I assume they need a full remodel/upgrade).

I could very well try to throw a very lucrative all cash offer (that's above market price) at them, but if the value is in getting a MF for a fair (or even low) price - improving them, raising rents, and holding - why would I overpay for them?

I also don't think this is the best approach for an unmotivated seller, especially one with obvious ties to the property (40+ years living and managing the units).

I think the lucrative offers to persuade someone who is "on the verge" or "considering" selling might be the best target audience, but that's just my opinion.

Michael Le · Answer

I think the problem with these scenarios is that they generally involve non-motivated owners, non-capitalized buyers looking for 100% seller financing, offering below market prices. Is it possible to purchase with any of the above scenarios?  Sure. Is it possible with all of the above scenarios? Very unlikely until one or all of those changes.

So the answer to your question is... offer way above market and a quick all cash closing. That will likely convince even an owner looking to hand down a legacy to their sons.

Andrew Johnson · Answer

@Matthew Ries I'd throw this into the "touch base every 90 days" file.  If the current owner is planning to leave it to their sons there's some emotional attachment there.  Not to mention you're saying it's the home for the owner right now.  So you basically have now emotional reasons not to sell.  Now if the current owner/occupant ends up being moved to an assisted living facility, the children aren't enamored with being a landlord, the children get job offers out-of-state and move away, etc. then you might be able to has a purely fiscal discussion about selling.  And there could be 100 triggers that we can't think of that may change the owner's mind.  You just never know.

If you want to make an impression go back in a week with a business card, an 'if you ever want to sell note' and a box of donuts.  It might be a $5 way to make you get remembered and differentiate you from other people that have come by and made offers before.  I've never tried this hypothetical box o' donuts but for $5 it can't hurt.

Ryan Huggins · Answer

They are not sellers.  Don't spin your wheels on someone who won't sell.  Go find someone who will sell.

Michael Le · Answer

@Matthew Ries, I didn't say you should overpay. I'm just saying that's one way you might be able to convince unmotivated sellers. There's a reason why the sales cycle is counted in years for commercial brokers. You can be sure you are not the only one leaving their calling cards and touching base every so often. The difference is the brokers have more experience doing so and it is their job to do so. It takes many lunch meetings to finally convince someone to sell through them. Personally I'd rather just let them do their job and I'll work with them. But obviously there are benefits of finding that off market deal. And if you don't mind working for a long time with various unmotivated sellers, I think it could potentially work for you. I wish you the best of luck.

Christal Warren · Answer

I agree on not toally giving up on them.  You never know when their circumstance may change and they become a motivated seller.  So I would put them on our list and drop them a letter/card every couple months.

Matthew Ries · Answer

@Jesse Moran that is my hope for a "win/win/win"

@Salvatore Lentini I appreciate the suggestions and advice.  I like the idea of touching base throughout the year, but not being overbearing/annoying.

@Andrew Johnson Thanks Andrew, I like the idea of "coming bearing gifts" even if it's something as simple as doughnuts or cookies.  I will definitely continue to keep contact with this owner periodically.

How do you convince an owner to sell?

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