Multifamily Offer contingencies

[Yuvaraj Vimawala]

Hi BPites,

As we all know the MFR market is pretty hot and deals are far and few between. A strategy I have been following is to make few offers every week without seeing each and every property. I strike out almost 100% of the time in this hot market. But anyways, I wanted to ask if someone had a list of recommended contingencies to put on their offer so it is easy to get out of the deal or re-negotiate the price if the condition, income or repairs are worse than the pictures or details provided and avoid losing earnest and option $$.

1. How to include a repair credit/inspection contingency in the offer (verbiage) ?
2. Should the offer include who will pay closing costs? (typically seller or buyer pays)?
3. What would be a contingency to get out of the deal if the rent rolls/ operating statement or lease info is not-verifiable or turns our to be false ?
4. What sort of financing contingency to put on offers (what if my lender denies the loan based on the MFR income reported)?

If anyone is willing to share a comprehensive MFR offer template, I will be very grateful. Thank you

[Brian Burke]

The price and terms you are offering might not be the only reason that you are batting zero on your offers. In this competitive market sellers can be choosy with their buyers. They want certainty of closing and a buyer that they know can and will get the deal done with minimal hassle and no renegotiation.

So submitting offers without touring the properties isn’t doing you any favors. Brokers just say “here is another guy wallpapering the city with offers”.  Instead, tour the properties, inspect them thoroughly, and submit your offer with only a contingency for due diligence (which essentially allows you to cancel for nearly any reason and is commonly used in the multifamily space).  This shows the brokers that you are a serious buyer for the property and not just an offer writer that will sort out the real terms during escrow. 

As an added benefit—as you tour deals you are building relationships with the brokers and building that trust that gets them to recommend you as a buyer to their sellers.

If touring the properties is too much workload or travel for you, get a partner and make that their role; while your role is sourcing deals, underwriting financials, and making offers. You probably have to share some of the profits with your partner but if it increases your hit rate on getting awarded deals, you come out ahead.

Your competition is likely submitting offers with a 30-day due diligence period and then 30 days to close and few to no other contingencies. If you can’t compete with those terms you’ll probably find it tough to connect on the offers you’re writing.