Common why the MF property is for sale?

Question

Edit - wont let me fix. Common ‘Reasons’ why the mf property is for sale?

I know this is question greatly varies, but i only own sfhs.

It seems they are typically listed because the seller is moving, downsizing, etc.

I was curious from folks on here who own mfs - what are common reasons the seller sold?

This is something im interested in, but ive never really looked much into, as the seller would also be an investor (unless it was an estate or something) and figure they likely are selling for a good reason and know more than me (ex. tenants giving issues, etc.).

It seems folks reach out to the owner even when not listed to find their deals. Ive never done that with sfhs, which i dont have anything against. So that maybe responses to this, which im curious why the person then decided to sell too

thanks

Nathan Gesner · Answer

I'm thinking back over the last ten years and every multi-family I've seen on the market has been sold because the owner is tired or just ready to move on to other things.

Nathan Gesner · Answer

Your offer to purchase should include a requirement that they provide all documentation and agree to sign an estoppel certificate (also called estoppel form or agreement). The estoppel certificate is a form filled out by the tenant and then confirmed by the Landlord. It's supposed to ensure there are no surprises after closing. For example, you buy the place and the tenant could claim the Seller allowed them to paint the walls black or that their security deposit was twice what the Seller claimed. How will you know? An estoppel certificate fixes this problem. Some things it may include:1. Tenant name, contact information, and address2. Occupancy date3. Is there a written lease? If so, review it to ensure it matches the estoppel certificate4. Are there any modifications to the written lease?5. Are there any verbal agreements or arrangements between the current Landlord and Tenant?6. Current lease term (expiration date, month-to-month)7. Current rent rate8. Rent due date9. Security deposit amountYou can find plenty of examples by searching for "tenant estoppel certificate doc" or exchange "doc" with "pdf" for more options.Here is an example and explanation: https://eforms.com/rental/esto...Some have a lot of legal jargon but this document does not need to be so detailed. This is an important tool for anyone buying a tenant-occupied property.

Ryan Hayhurst · Answer

@Nathan G. Nathan G is spot on. I recent bought an 11 unit from an out of state buyer that just wanted out. I have since been shown an off market 8 unit MF plus some sf’s from an older couple that live in another city in same state but are ready to get out of the rental business. All their properties are in great shape and they were well managed. So they just want to move on to another stage in life or retire or something else. I’m not really sure exactly why they want to sell, but it doesn’t sound like it’s anything bad related to their properties or tenants. From what I hear talking to brokers and others, this is very common. And the best thing about some older owners that have had their properties for a while is they often have below market rents since they maybe cash flowing so haven’t felt the need to raise rents to keep up with the market.

Rocco Swinney · Answer

hi Ujwal! I greatly appreciate the detailed response. Sounds like you really know this space. This is very helpful

Is there anything else you think one  might not be aware of when moving from sfhs to mf?

Ex. ive heard of people having issues with comps on mf because of lack of sales to compare. Or when you have mf the state laws are more strict in terms of not only smoke dectors and carbon monoxide detectors.. but additional?

As i know for me - specific to sfh  I wasnt aware at first that some states require rental permits on sfhs when i first started.

Ujwal Velagapudi · Answer

@Rocco Swinney I definitely know what you're getting at, like what does this seller know that I don't. I always wonder this, and do ask every seller, but sometimes you're given the generic answers (which could be true), and sometimes something seemingly more real that you can grasp on to. Doing proper due diligence will definitely help find some issues that may have been unforeseen, but I don't think there is a way to uncover every little thing and do a full transfer of knowledge from the seller to the buyer (especially if it's been with the seller for a while). There are always things, small or large, that do get by a due diligence that you only uncover after taking possession where some you have recourse and others it's just not worth your time. Personally, I prefer long time holders of the asset, not just someone who has held it for a year or two.

I purchased all my MF's from retiring sellers, ages 75-85, with ownership of the buildings from 20 years all the way to over 60 years. I knew there was a genuine reason for why they were selling, and they had taken care of their long time properties for decades. There was definitely no way I could manage it in the same manner and know every little crevice of the building, city, tenants, etc. like they did.

When I sold mine, I had already moved across the country and was looking to divest from the asset class. I tried to share every single red flag, concerns I had, pending issues, etc. with the buyer from the building, tenants, city, neighborhood, vendors, etc. but it is tough to get that support from all sellers.

Rocco Swinney · Answer

Since im not in this space i honestly cant say, but I would assume its similar to sfhs. Just because its good on paper.. doesnt always mean its worth it.

Ex. the seller was having issues with the house beside them who constantly has parties, multiple vehicles, etc.

Ex. the tenant calls in almost daily for repairs on items that arent even needed

etc.

Rocco Swinney · Answer

Thank you! Looks like i still have a lot to learn with the mf. I greatly appreciate your detailed feedback, as im hoping to give it a try within the next few months. Im a little intimidated to be honest lol, but thats how i first was with sfhs too

Ujwal Velagapudi · Answer

@Rocco Swinney I had actually jumped straight into MF after months of SFH/condo searching and failed deals, so not as familiar on the SFH side since I only had a few later on. But comps were a big issue for me as well, especially since I was doing primarily commercial retail and mixed use living as well. Oh I didn't know any of that either about permits, learned the hard way with a fine. But the requirement for getting everything up to code seems to be more stringent like you said for MF, as well as your insurer's requirements. Never processed a claim on a MF so don't know the process vs. SFH, but I would think it's a bit tougher to do as well. Tenant/neighbor quarrels were an issue for me as there were shared walls between units. Maintenance is on us in MF for the common areas (weeding, trimming, external lighting, hallway cleanliness, carpet cleaning, salting sidewalks, etc.), whereas in SFH I just let my tenants take care of all of that. Also look at deferred maintenance/capex with an estimate or two for each job during due diligence, which can be significant if the seller has had it for a long time and just keeps patching things up - the buyer will take the brunt of the repair when it turns hands.

Ryan Hayhurst · Answer

@Rocco Swinney I wish it was more creative, but I just did a traditional commercial loan with a local community bank that was a referral from the selling broker. It was 4.25% on a 20yr AM with a 3yr balloon. My plan is to get the rents up, expenses down and refi in the next few years to pull my equity back out. It’s my first deal so we’ll see if I can execute. 😉

Rocco Swinney · Answer

Congrats on your recent purchase! Thats awesome! If you dont mind me asking... how did you go about the funding? seller financing? commercial?

Common why the MF property is for sale?

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