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Updated over 5 years ago, 05/16/2019
Owner Financing - 11 Unit Apartment Complex
Investment Info:
Large multi-family (5+ units) buy & hold investment.
Purchase price: $500,000
Cash invested: $100,000
11 Unit Apartment Complex
What made you interested in investing in this type of deal?
I became interested in this deal because of the success had from two previous Multi-Family investments.
How did you find this deal and how did you negotiate it?
I found this deal by searching every single multi-family property through out the county assessor website. I then narrowed down a list of properties that would be within my purchase price range. I found the owner's address and went to their doorstep asking if they were interested in selling. At the time they were not interested but asked me to check in with them at a later date. A year later I wrote a handwritten letter and received a phone call stating that they were ready to sell.
How did you finance this deal?
Initially the seller wanted to sell the property through conventional means, but through my Biggerpockets education I was able to confidently explain property valuations and the benefits of owner financing. The owner agreed to a down payment less than the conventional financing requirement. I purchased this property at a 9.7% cap rate.
How did you add value to the deal?
I plan to reduce management, and landscaping expenses and raise rents to market rent. There is also a large storage unit on-site and I plan to rent that out as soon as the previous owner removes their personal belongings.
What was the outcome?
This is a new acquisition and the outcome is yet to be seen. I plan to refinance through conventional means once I have effectively raised the NOI.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Cheryl Lakey of Chicago Title has set up the financing documents. Strongly recommend.
Amazing, @Casey Roloff I'm hoping time will play in my favor too for a 13-unit property I've set my eyes ons. I just need a bit more time to save up the cash I need for the downpayment!! Please keep us posted with regular updates.
living the dream :-)
Great job, @Casey Roloff!. Thank you for sharing with all of us.
Congratulations on the acquisition..now the hard work! Inspiring case study.
Inspiring, Thanks for sharing.
@Treavor Clune. My first MFR property was a local fourplex. I actually created a deal deep dive for that property as well. It's listed under the investment portion of my profile.
@James Canoy. Good question! Personally, I feel like I may have been over my head had I purchased this property as my first deal. I began with several SFR rental properties & moved on to a fourplex. At the beginning, each issue was a big deal, and I would deal with the problem first hand. Now, I've learned that there is a process for resolving issues and nothing is worth getting too stressed out about, and I've been able to delegate most of the tasks to managers, and/or contractors. I'm grateful for the knowledge and experience that the initial properties taught me and feel that I wouldn't be able to capitalize on deals like this with out it.
@Casey Roloff Damn. That's amazing. Very inspiring and keep on getting it!
Originally posted by @Casey Roloff:
Investment Info:
Large multi-family (5+ units) buy & hold investment.
Purchase price: $500,000
Cash invested: $100,000
11 Unit Apartment Complex
What made you interested in investing in this type of deal?
I became interested in this deal because of the success had from two previous Multi-Family investments.
How did you find this deal and how did you negotiate it?
I found this deal by searching every single multi-family property through out the county assessor website. I then narrowed down a list of properties that would be within my purchase price range. I found the owner's address and went to their doorstep asking if they were interested in selling. At the time they were not interested but asked me to check in with them at a later date. A year later I wrote a handwritten letter and received a phone call stating that they were ready to sell.
How did you finance this deal?
Initially the seller wanted to sell the property through conventional means, but through my Biggerpockets education I was able to confidently explain property valuations and the benefits of owner financing. The owner agreed to a down payment less than the conventional financing requirement. I purchased this property at a 9.7% cap rate.
How did you add value to the deal?
I plan to reduce management, and landscaping expenses and raise rents to market rent. There is also a large storage unit on-site and I plan to rent that out as soon as the previous owner removes their personal belongings.
What was the outcome?
This is a new acquisition and the outcome is yet to be seen. I plan to refinance through conventional means once I have effectively raised the NOI.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Cheryl Lakey of Chicago Title has set up the financing documents. Strongly recommend.
How did you narrow all the multifamily down on the county assessor? I know every county is different but that's something I've never seen before or heard of
Congratulations!!! Very inspiring... good work on finding the property, connecting with the owner and follow up a year later.
Thank you very much man! I wish you so much luck.do you know anything about the Tempe/ phoenix area?
@Casey Roloff I take it the owner didn't have a remaining mortgage on the property? I am looking at trying to owner-finance 2 fourplexes currently on the market. The current owners have a small mortgage remaining on both properties. I'm concerned about the "due on sale" clause... I think it would be better to pay off the mortgages, if it all possible, during the transaction.
@Robert Shedden. You are correct, no mortgage on the property. Seems like a smart decision to outline the mortgage payoff in the sales contract.
@Garland Young. I haven't paid much attention as the prices are much higher than my local area.
@Roshan K. We have an advanced search feature which enables us to select the type of property. MFR is one of the many options.
@Casey Roloff That is awesome! What is your end game? If you are paying interest only for 5 years, what is your plan after that time?
Thanks so much @Spencer Cornelia
@Casey Roloff I've got 2 owner financing scenarios in play. I'm tracking with your bullet points but can you explain the 100k interest received given 5-year balloon? Were payment terms 10k of interest paid per years for 5 years then the remaining 100k due at balloon payment?
Congrats on closing on this deal! Thanks for sharing!
What a chore going through the assessor website must have been, congrats on the purchase!
Originally posted by @Brandon Sok:
@Casey Roloff I've got 2 owner financing scenarios in play. I'm tracking with your bullet points but can you explain the 100k interest received given 5-year balloon? Were payment terms 10k of interest paid per years for 5 years then the remaining 100k due at balloon payment?
I think you flipped the down payment with his amount on the owner financing.
The seller has a note for 400,000 @6% for five years. The interest the seller is making is the extra 100,000 in profit for the seller. Spread out over five years which makes the sale price lower for the buyer and helps with taxes on the property. But gives the seller 600,000 at the end of the day instead of 500,000.
I’m digging this deal. I’m actually trying to find a seller in my area using the same method you described. Now I just gotta find 100,000 dollars for a down payment :)