What is the best approach in acquiring 3 separate MFH?

Question

Good day Biggerpockets community!I need your help in the best course of action of acquiring 3 multifamily properties at the same time.A property owner has agreed to sell me 3 of her 4plexes. She said she'll get back to me after speaking with her realtor and accountant. I went ahead and evaluated each of them and have an idea of what is the most I can pay for each. However, I haven't evaluated them as if all 3 were a single property. This would be my first time trying to tackle this situation so I wouldn't know how to go about this. Would anyone help me in:1. How to evaluate them as a single commercial property? The property tax is what gets me confused2. Should I start with lenders and see if they offer a product for this acquisition?Any help would be much appreciated! Thank you and stay safe out there

Adrian Fajardo · Answer

@Todd Pultz Wow! Your response is gold! I'll keep coming back to your message. Thank you so much Todd.I'll get right on it. I already did my preliminary evaluations but it's more like a quick evaluation. I didn't even consider the exit strategies you mentioned. I'll run them through what you suggest and see what I can offer.The property doesn't look too bad. It looks well taken care off. I haven't seen the interior so hopefully I can do some updates there.Like you said, I won't know too much about the seller's current situation. I'll reach out again tomorrow. Before you mentioned it, I didn't consider taking them down one at a time. But if I do pull out everything with a refinance then I can do the same again.Thanks again Todd! I appreciate all your help! You're a good man.

Todd Pultz · Answer

@Adrian Fajardo tackling a package deal like this is great. Owner financing would be my first route, but you have to figure out what seller wants first. Higher interest, bigger down payment, short balloon, higher purchase price etc? I always start with trying to determine their monthly NOI and try to work on an offer that nets them that much and just a bit more monthly. That might be intriguing them if you are removing the headaches. The goal is to get in at 70% ARV all in, that way once you Raise rents, fix up etc., you can pull all money back out and have 0 in the deal. If you go to a lender they will be able to do a portfolio loan or blanket mortgage. The key is to make sure you can get individual properties released from the mortgage if need be. Get in at the right price and rinse and repeat! You need to make sure there is value add here and her calling a realtor is not a great start. I would draw up an offer ASAP and present it to her fast. Get her thinking

Jonathan Greene · Answer

Yeah, why would you try to consider them as a package from your own personal evaluation perspective when they all have different characteristics? I can tell you right now that if the seller is talking to their agent and they are all listed, it won't be a the price you want even though the realtor has a big reason to get the deal done with three commissions. There are block products available, but you will need to produce a lot now and probably need 6 months reserves for each property at a minimum. How much can you put down on the block?

Frank Hinck · Answer

@Adrian FajardoConsider them separately not as 1 for your own evaluation. Run your own numbers not just the proforma they give you. Get a GC or an inspector familiar with multi family. Check if there’s value Add items you can do while there. Yes commercial banks or community banks do offer Portfolio Loans, ask to talk to a commercial banker.

Frank Hinck · Answer

@Adrian FajardoI’d push for Owner financing, ask them to consider no broker for the seller if possible. Allow 30 days due diligence check other local rental rates and put together your own proforma. A bank would consider all 3 buildings as 1 loan, but YOU need to make sure each building can financially stand alone - why buy #2 if its a cancer and doesn’t cash flow, it could be dragging down #1 and #3. Check each out for delayed capital improvements (HVAC, roof, asphalt), see if each building has all separately metered utilities.

Todd Pultz · Answer

@Adrian Fajardo the numbers work based on what you provided. A little tight but ok. You would be buying it at 8-9 cap and after rents are raised you would be operating somewhere around 11cap. I’m not familiar with your area, but based solely on income, I would guess your ARV would be around 205k, is that what you believe? If that is accurate and you refinanced you would be leaving close to 30k in the deal. So it doesn’t fit the the brrr criteria, but you appear to be cash flowing a little. I would say it’s a base hit but not a home run.

Adrian Fajardo · Answer

@Todd Pultz on the far right, my asking price is $180,000. This will be bank financed. I'm putting 25% down and I estimate 4% for the closing costs.The property doesn't seem too trashed but probably outdated. My PM said that one of her realtors renovated a property nearby and it's renting for $675. The numbers here are what it is currently running on and I use it as a stress-test. Based on the new guidelines of the CDC, I'm trying to see if it still is a deal as it currently stands.What do you think?

Todd Pultz · Answer

@Adrian Fajardo so what is your purchase price? I can get close base on your numbers, but want to know exact as your closing cost and down payment seem high

Adrian Fajardo · Answer

@Todd Pultz I attached the file but it doesn't seem to show up as a picture. I'll post it here instead.Please let me know if any of these doesn't make sense.

Adrian Fajardo · Answer

@Frank HinckYou know what, owner financing is a huge possibility. According to the tax records, the owner has owned these properties for 26 years.Will do, I'll figure out which ones are performing and cut out the one that isn't. I'll get right to it. Thank you so much Frank. Your advice helped a lot!