All Forum Posts by: Matthew Insley

Hello fellow investors!

I could use some advice from somebody with experience negotiating directly with sellers. I am a real estate investor that focuses on smaller multifamily properties.  Currently, I have 23 units consisting of 2-5 units each.  Recently, I sent some letters out to the owners of properties that fit my criteria.  Immediately, the owner of my most desired properties called me.  He said that his wife just died and he might be looking to sell.  He went on and told me that he just wanted to let me know that he got my letter.  I told him that I was sorry to hear about his wife and that we could try and find something that worked for both of us.  This initial call was pretty short and I did not want to press too hard right away, especially given his situation.  A couple of weeks went by and I called him to set up a meeting at the property.  Before I could really say much, he hit me with a crazy number for his 3 properties consisting of 10 units total (these properties do have mortgages).  He said $650k if he listed with a realtor, but he would sell them to me for $600k! I tried to keep calm and get sucked into a haggle.  I pivoted and said that I would talk it over with my partner and let him know.  A couple days later, I called him and this time I got a meeting at the properties scheduled (still without talking numbers).  My partner and I spent over an hour talking with him at the property, and he is still at his initial offer even though we pulled some strategies out of "Never Split the Difference" by Chris Voss.  We tried to get him to negotiate with himself, but he didn't take the bait.  We did build a good relationship meeting this seller and ended on a good note without us giving a number yet.  He does want to eventually sell all of his units (about 20 total) which are very desirable to us. A realistic range for us to buy these 3 properties is $375k to $400k. Any advice on bargaining with a seller giving an extreme price anchor.  We are trying to not be coldly logical with him.  Instead we want to be very thoughtful and prepared.  This is a big opportunity that we don't want to be careless with.

Thanks!

@Nathan G what contributes to ROI dropping in 7-10 years? I am a new investor and would love the insight. Thanks

 @Travis Nagler Springfield is a stable market.  Small multi-units have very little appreciation if any.  You are looking mainly at cash flow and principle pay down only.  Inventory for these deals is hard to find, but cash flows are better than what I have seen in the Dayton market for small multi units unless you are in a bad area of Dayton.  Hope this helps.

I invest in small multifamily properties in Springfield OH. This is a great way to get a good return with diversified risk. Check out the deals that I shared in my profile. My issue with SFR is that if you have an eviction or other issue with a tenant, you have $0 coming in. I had an eviction last year in my 4 unit and still made money.

I am a new investor also. I suggest small multi-unit properties to get started. It gives you more of a cushion for vacancy, repair, etc. I would never put 50% down on an investment property. The whole point of real estate investing is leverage increasing your ROI. I would also consider talking to other banks about fixing your primary home's interest rate before rates go up too much. If you cannot afford multi-units in your area, consider investing where the numbers make more sense.

Hi Albert,

I have invested in small multi-unit properties in Ohio.  In my area, "comps" (comparable sales) are hard to come by for these small multi-units which makes the appraisal somewhat unpredictable.  If you have a real estate agent, I would ask them for comps to determine where you need to get to condition wise in order to justify a refinance to get your cash out.  If your property is 4 or less units, it is solely based on comparable sales.  I think that you are on the right track with looking at kitchens, bathrooms, and flooring for improvement of value.  Good luck!

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $127,000
Cash invested: $17,000

This is a 5 unit property in a C neighborhood. 4 units are 1 bed 1 bath units. Cashflow does not account for vacancy, repair, or capex.

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

Multi-units have better cash flow and more cushion for issues that arise.

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

MLS

How did you finance this deal?

20 year 5/5 ARM 20% down minus repair allowance of $10,500 (applied towards down payment), seller paid $3000 closing costs also. Repairs aren't super urgent, will use cash flow to slowly replace windows and make other minor repairs. Roof condition is moderate.

How did you add value to the deal?

Raised rents from $1950 per month to $2250 per month.

What was the outcome?

A great cash flowing property. Vacant units get rented without issue.

Lessons learned? Challenges?

Get a cheap maintenance person for repairs. Give them small jobs to judge their character and quality of work.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I always work with my real estate agent.

Investment Info:

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

Purchase price: $100,000
Cash invested: $28,000

4 unit: 1 bed 1 bath each. 2 upstairs and 2 downstairs. $475 for 3 units $450 for 1 unit. Monthly cashflow does not account for vacancy, repair, cap ex. Property is in overall good shape. Roof has been replaced in the past 5 years. Working on replacing windows slowly.

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

Higher cash flow with multi-units.

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

My real estate agent brought it to me as an off market deal.

How did you finance this deal?

I financed this at a local portfolio lender with 25% down and a 20 year 5/5 ARM.

How did you add value to the deal?

Raised the rents from $1710 per month to $1875. Replaced the windows in one unit so far.

What was the outcome?

A small multi unit in a decent part of town that produces good cash flow.

Lessons learned? Challenges?

Bed bugs are everywhere!! I have learned to get a cheap maintenance person and have them buy the good chemicals from A1 Able and spray it for you. If you have A1 Able do it, it is way too expensive and they don't guarantee that it won't spread to other units in the building. Month to month leases are a great way to maintain control over tenants who are possible problems. 30 days notice is all it takes to get rid of them. Then you can file eviction if needed.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I always work with my real estate agent. She has saved my butt a couple of times when trying to get too creative.

Investment Info:

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

Purchase price: $100,000
Cash invested: $28,000

4 unit: 1 bed 1 bath each. 2 upstairs and 2 downstairs. $475 for 3 units $450 for 1 unit. Monthly cashflow does not account for vacancy, repair, cap ex. Property is in overall good shape. Roof has been replaced in the past 5 years. Working on replacing windows slowly.

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

Higher cash flow with multi-units.

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

My real estate agent brought it to me as an off market deal.

How did you finance this deal?

I financed this at a local portfolio lender with 25% down and a 20 year 5/5 ARM.

How did you add value to the deal?

Raised the rents from $1710 per month to $1875. Replaced the windows in one unit so far.

What was the outcome?

A small multi unit in a decent part of town that produces good cash flow.

Lessons learned? Challenges?

Bed bugs are everywhere!! I have learned to get a cheap maintenance person and have them buy the good chemicals from A1 Able and spray it for you. If you have A1 Able do it, it is way too expensive and they don't guarantee that it won't spread to other units in the building. Month to month leases are a great way to maintain control over tenants who are possible problems. 30 days notice is all it takes to get rid of them. Then you can file eviction if needed.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I always work with my real estate agent. She has saved my butt a couple of times when trying to get too creative.

I currently have about 80% of my tenants mail me a money order and do not have bank accounts.  I would love to try and get some or most of them to pay me electronically using paypal or venmo.  Does anybody have experience doing this? I have read that paypal might have an option to deposit cash into a paypal account at CVS/Walgreens.  I do think that all of my unbanked tenants have smartphones that would be capable of having paypal on them.  My initial thought was to give a one time rent discount for the tenants who tried this payment method out.