First Value-Add Apartment Opportunity

[Josh Detweiler]

Hey guys, I've been getting educated about purchasing apartments for several months now and I while I recognize I'm at a point where I have a lot to learn and I don't know what I don't know I believe I found an opportunity worth pursuing and I don't want to miss out because of fear/inexperience.

Here's building- It's a 51 unit in a rural area (45 min drive from Philly/Conshohocken) with low crime/unemployment. The building looks like a classic value add, lots of differed maintenance on the outside of the building. It does not seemed to be managed well, property is a mess and has no online presence among other things. It looks like vacancy is low and I would assume a high number of section 8 based on the parking lot being full around 12pm on a weekday. Rents are about $150 below market, compared to a similar apartment complex 1 mile away.

The owner purchased the building in 1972 is 80+ years old and lives within a 20 minute drive, he lives in a moderate not wealthy neighborhood. If I had to assume he's keeping the building for the cash flow but doesn't want to or can't invest the money into fixing up the building. I want to be prepared to answer any objections like avoiding a huge tax bill or loosing his monthly cash flow. What advice would you give before I reach out to him? Thanks. 

[Todd Dexheimer]

Find out what he wants and give him that. If he is 80+ and just wants the cash flow, then give him 5-15% down payment and have him carry a note for 5-10 years at 5%. Show him his monthly payments from you, so that he understands what you are offering. 

If he doesn't want to get crushed with taxes, seller financing is a good option or get in touch with some financial companies that are offering DST's that he can 1031 exchange into or find a few NNN lease properties nearby that are listed that he could buy.

If he wants to pass it down to his kids, then ask him if they would rather have the cash or the building to run and maintain. 

There are other potential objections. Right them down and answer them first before talking with him