Investor · North Wales, PA · Member since 2013 · 116 posts · 44 votes
I'm considering an offer on a 4-plex, where the two upstairs units are occupied. Understandably, they don't want people tramping through kicking tires.
The downstairs needs work. If we got it we would plan to totally renovate the downstairs to make it into a more modern layout. I wouldn't want to live in the upstairs if it looked like the downstairs, but people live there so maybe it's better? (I'm newer to this, so not as much experience as some of you in what sort of conditions people willingly tolerate.) Obviously if the upstairs needs as much work as down, the price I'm willing to pay adjusts accordingly.
How would you price an offer here? As if upstairs is OK to get contract, then negotiate downward if it's not? What sort of contingencies would I need to allow for this secondary negotiation?
Basically trying to figure out the correct balance between protecting myself and not making my offer so obnoxious / intimidating that it's rejected immediately.
If I'm selling 16 units, no one is going through all those until an offer is firmly planted. There are not going to be multiple lookers getting multiple appointments with all the occupants. There can be one look see, if there are issues in any unit, other appointments can be made to address those issues. A 4 plex would be easier but there still won't be lookie-loos one after another bugging my tenants who have the right of quiet enjoyment. Appointments can be made after a basic deal is struck and the ability of the buyer to perform is verified. :)
I wouldn't make an offer without seeing the upstairs first. That being said, if you do plan to offer without seeing it, I'd start with the assumption that the upstairs is as bad or worse than the downstairs. Make an offer accordingly and if the seller wants to counter, then you refuse until you can see the other unit.
It's a lot harder to negotiate down than it is to start low and come up a bit.
If you assume the worst your offer would be lower and may not be taken or even acknowledged. If you assume the best your offer should be higher. Since the offer is subject to final inspection as well as other inspections, I assume the best so that the offer may get accepted, at least acknowledged so that we can negotiate. Then if deficiencies are found, they cost to repair is noted and reflected in another offer or it doesn't pass inspection and you're out of the deal :)
It sounds like the seller isn't that motivated or might be hiding something if he is unwilling to show you the upstairs. I understand the whole tramping through an occupied unit....but a 5 minute inspection might save you thousands of dollars later on. Again, I'm sure you know this. It's like buying a car when you haven't even heard it start up. Dicey.
Do multi-family properties with units occupied usually not allow a potential buyer to look at them? I would really want to see all units prior to buying, especially the ones the seller is trying to have me avoid.
If I'm selling 16 units, no one is going through all those until an offer is firmly planted. There are not going to be multiple lookers getting multiple appointments with all the occupants. There can be one look see, if there are issues in any unit, other appointments can be made to address those issues. A 4 plex would be easier but there still won't be lookie-loos one after another bugging my tenants who have the right of quiet enjoyment. Appointments can be made after a basic deal is struck and the ability of the buyer to perform is verified. :)
It's like buying a car when you haven't even heard it start up. Dicey.
There is a vast difference here, you're not buying anything yet you're just getting into contract. Once you look it over and meets your expectations of the offer price in that contract then you would be buying.
This is actually fairly common with multi-family rentals for sale. Owners don't want tons of potential buyers, many whom might not be that serious bugging their tenants of the occupied units. Usually there will be one unit vacant or the owner will give one of the tenants a break in rent for being willing to have people look at the unit to get an idea of layout and condition.
Here is what I would recommend in these situations. Ask the seller or selling agent how the condition of the unseen apts compare to the ones you have seen and base your offer on that. Put a contingency in the offer that states your offer is contingent on viewing and approving the condition of the unseen units. When you get to see the units if they are as represented and you are happy, then you are good to go. If the units don't meet your approval based on your original price then do an addendum with a new price and the reasons for the discount. If the seller agrees to the new price then you are back on track, if not then you walk away.
This is standard practice for MF. Do you really think that anyone interested in a 300 unit complex is going to inspect every single apartment before even making an offer? Making an offer/contracting to purchase does not mean that you are locked in and cannot back away. During the due diligence phase you can walk away for any reason. Once an purchase contract is in place you can then inspect and re-negotiate based upon any deficiencies you find. Its really not any different from buying a house.
If you go about demanding to see the entire place before even writing an offer then your going to come off as a inexperienced/uneducated/non-serious buyer Brokers and sellers will either not want to deal with you and ignore you or try to take advantage of you.