I am under contract on a 13 unit and estimated repairs after inspection are $150K-$200K. There are minor details here I am not overly concerned with. Contracted much lower than ask but that was based on analyzing the deal and week of negotiating with 4 vacancies. Any suggestions on how to approach this with the seller. Any input would be greatly appreciated. Thanks.
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
6y
@David Levin Congrats on the find! 150-200k is a bunch; but not unusual apartment buildings always have things that need attention. I would get back with the seller, review the findings with him and do some more negotiating, see what he is willing to give on. Keep it simple and allow him the option of fixing some major item or items, and re-inspect. I would shy away from giving him a list of 15 things because he probably will do some and ignore others. All the best!
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
6y
@David Levin Congrats on the find! 150-200k is a bunch; but not unusual apartment buildings always have things that need attention. I would get back with the seller, review the findings with him and do some more negotiating, see what he is willing to give on. Keep it simple and allow him the option of fixing some major item or items, and re-inspect. I would shy away from giving him a list of 15 things because he probably will do some and ignore others. All the best!
Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes
6y
@David Levin I am always thinking about what it would take for you to get the deal done vs what it will cost. If you know it is a great deal and fits into everything financially, play a little chess, hedge your bets and give it to the seller easy. He/She will be more likely to negotiate if he knows you want to get a deal done. If it is on the fence and not sure if it will pencil, tell him what you need in order to complete the deal.
Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
6y
Are these "repairs" things that need to be done to operate the building such as HVAC, electrical and plumbing issues, roof problems and structural issues with stairs, decks and so forth?
Or, is it things like painting, flooring and kitchen counter replacements?
Thank you all for your input. John these are repairs to operate. The plumbing is galvanized and hot water pressure in some units is maybe at best slightly more than a drip. Roof will need work, tuckpointing and replacing lentels in 20% of the building. One unit needs complete gut and rehab which was not disclosed prior to contract.
Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
6y
@David Levin as mentioned, does taking down all of this work yourself kill the deal on your end?
I would say it also depends on the access you were given before making an offer. Galvanized pipes were likely exposed and therefore something you could have seen during an inspection. Tuck pointing and lentels are also typically easily visible in a walk around of the building.
For the water pressure and unit gut, if you were given access to tour units prior to offer and didn't, as a seller I would say it is on you. If the seller did not give you access to units, ability to check water pressure, check roof, there is probably room to negotiate.
In general, as @Alex Olson mentioned, what do you think it will take to get this deal done. If seller has 5 other offers stacked behind yours, he will likely say take it as is or leave it. If it has been sitting on the market for 9 months, cashflow negative, etc, he is more likely to play ball.
Finally, $200k is a big number, but what is the purchase price? If you are talking $2mm, then 200k isn't quite as big of an ask than a $400k purchase with a $200k ask.
Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
6y
@David Levin I get that it was viewed at inspection, but as a seller I would ask myself a few questions
Was it viewable or discoverable before an offer was made
Will another buyer ask for it
And how much will a backup offer ask for
My comments were not as to when it was discovered by you, but when COULD it have been discovered. If I was the seller and gave you access to all the common areas where things like galvanized piping, tuck pointing, and lentels could have been seen during that walk through.
If there was limited or no access provided prior to offer being made, that is another scenario. If this is the case, I would feel more confident going back and asking for things, but as mentioned, it really comes down to the mental math of what gets the deal done and what do you think will kill the deal.
@Evan Polaski. Understood. Let's just say not all of these issues were known (gut rehab never disclosed) or available. But contracts also have contingencies. An inspection is one of them. But, that being said, I love the feedback. It's something I did not consider. I appreciate the education.