4 Unit condo on LAND CONTRACT?

[Brienna Roberts]

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $776,000

This is a 4 unit townhome complex. Each a 1350 sq ft 3/2.5. Brand new build. We're purchasing from the builder and will be using as four short-term rentals.

What made you interested in investing in this type of deal?

I'm a realtor, so I called on the property thinking I may help the builder sell them, but I quickly realized this deal is something we should consider. It's right across from the park and beach in a waterfront community that is expected to flourish in the next 3-5 years since the waterfront factory has been torn down. When we offered to buy all units, the seller happily considered financing because he had hoped originally hoped to keep two for 5 years so he could make some money over 5 years.

How did you find this deal and how did you negotiate it?

This deal was very organic. Seller had the goal of making money over 5 years. So he wanted to sell two units and keep two. To do that, he needed to set up the condominium association which costs $20k ish and a lot of time. By selling all units to us, he didnt need to do that, and because he's financing he will earn money over 5 years like he hoped.

How did you finance this deal?

15% down LC at 6% interest with 5 year balloon. 6% is below prime! But he did that because there's only a 1% pre-payment penalty so he didnt want to incentivize us to refinance. He isn't greedy. Happy to be making 6%. The 15% DP is financed through our private money lender. 1 year loan ($150k) at 5%. That includes 35K to furnish 4 units.

How did you add value to the deal?

None yet. This will become a very successful STR. It's a brand new build, includes all appliances (W/D too). 18month builders warrantee. Upgraded finishes, painted nicely.

What was the outcome?

This is our latest deal. We're working on furnishing them now and they will be available to rent in May!

Lessons learned? Challenges?

It's interesting how easy things can be when you listen to the seller's motivations and interests and shift your thought process to make your offer as appealing as possible. Sometimes less is more.. This guy negotiated DOWN the price for us. He was selling at $146/sq ft but because we bought all of them. he offered $144. We were willing to pay more, but let him do the talking and then graciously signed on the dotted line!