OfflineI met with an owner to present a potential offer on a property which involved 20 units in 5 apartment buildings, however I believe that the owner is highly motivated yet unrealistic. I requested her rent rolls, financial statments and at least 3 years of tax returns. The owner seemed to be game yet coy. What I wanted to know is how can I get her to play ball. I know about projecting the rentometer and CMA(s). I need to devise another plan to go at this owner. Does anyone have any ideas. The owner keeps telling me that I should not go on the currents rents she is receiving (because she proposes that the rents can be increased). The properties are in a high crime area but I believe with the right negotiation that the is potential here, if no more than to flip this property. The owner is willing to take back owner financing on 50% of what is owed. I am looking for any hard money lenders to make this deal happen yesterday. Are there any hard money lenders out there who want to invest in Baltimore. What I propose to do is bird dog for what you are looking for ASAP.
$1 Million Dollar Flop in Baltimore. Where did I go wrong?
Posted on: Wed, 06/16/2010 - 00:49
$1 Million Dollar Flop in Baltimore. Where did I go wrong?
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- by superrich
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Superrich is this your first deal? Seems like a big deal for a newbie. If it is a high crime area I would stay away. Call the police on a non emergency line and get the crime reports for the area. For a commercial property you want to know the cap rate.
... Verses: 35 "but those who hope in the Lord will renew their strength. They will soar on wings like eagles; They will run and not grow weary, They will walk and not be faint." Isaiah 40:31 ...
You said it was 20 units in 5 buildings, So is this 5 four plex buildings?.
Anyway the way to get all the information on the deal is to submit and then both parties sign a letter of intent (LOI) In a commercial deal you use the inspection period( 30 to 60 days) to request, receive and verify the rent rolls, bank statements, vendor agreements, building conditions and engineering reports Etc. Etc.
Never, never, NEVER buy or negotiate on what a seller says they could get (blue sky) if they raised the rent. They are trying to charge you extra for something they have not done! Buy on existing NOI (net operating income) Rent minus expenses. Buy on cap rate and cash on cash return.
Negotiate earnest money due at time of inspection period completion if you can.(rare)Otherwise you will need earnest money to get the LOI signed. Find a private money lender to fund this deal.
Depending on the price and occupancy a ruff area can work. Section 8 renters are money guaranteed!
LOTS of things to consider and put in place to do a multi family deal with minimal risk. DUE DILIGENCE!!
Hope This Helps,
Michael Mangham
MD Home Acquisitions LLC
Knowledge is power, but execution trumps knowledge. Tony Robbins
http://www.mdhomeacquisitions.com Seller site
http://www.mdhomeacquisitionsbargainhouses.com Buyer site
http://www.mdhomeacquisitionshousehunter.com Bird Dog Site
http://www.mdlodeals.com Tenant/Buyer site
Thanks Michael for your wisdom. To have crucial/vital step by step instructions are invaluable so thank you from all of us.
Tomorrow is what you BELIEVE and DO today!
High Crime areas here in Baltimore depends on Blocks. It may be in one particular Zip Code is a very high crime in total but everything depends on the block. I'm not sure if that's also the case in some other Cities. Try to ask him what's the CAP Rate then thru that, you can compute the Estimated Market Value of that property. EMV= NOI/Cap Rate. NOI (Net Operating Income) is determined by subtracting Vacancy amount and operating Expenses from propety's gross income. I'm telling you this but i'm not sure if you did mentioned if the property is vacant or acupied. But I believe it should be your next approach. I agree with Michael. Blessings to all. LA
Everytime you repeat the words "I CAN DO IT" with conviction, you cancel or override your fear and increase your confidence. By repeating this affirmation over and over, you can eventually build your courage and confidence to the point where you are unafraid. -Brian Tracy-
Try these guys: Hard Money Bankers, LLC - www.hardmoneybankers.com
709 Frederick Road #2, Catonsville - (443) 539-8282
Catonsville, MD is very near Baltimore. I am not a fan of hard money, however, if this is a route someone takes, then that is their choice.
Jimmy B
Irababao has a good point. Cap Rate is a good starting point. When discussing cap rates, the deals with the lower cap rates, meaning 6,7,8, are prime properties. This means that the property is full or near full capacity wise, is in top condition and will come with a higher price tag.
The higher the cap rate, the worse the property. The vacancy level/rate is empty or near empty, does not generate top rents and is really troublesome.
Experienced investors will buy these properties, turn them around, get the cap rate low and then sell the property when the property is prime and sometimes triple their investment.
I don't know the seller, but I would say that she senses your the only buyer interested. I would point that out to her. Her willingness to carry 50% of the purchase price is not out of a charitable heart.
She may be playing hard ball to see how serious you really are.
Watch out for pro forma figures!!! Sometimes a seller will provide this to you and you do not want this!!! Pro forma is a strategy often used by realtors and sellers where they calculate todays numbers based upon past years performance when the property may have been in prime condition.
Yesterdays great performance means nothing today. You want current rent rates and expenses.
If she refuses, then ask her if she is giving away free apartments because you know a bunch of people who need a free home. When she says of course I am not doing that, then say to her, well then if that is the case, then you can provide me with the current rents and expenses.
There is something here that this seller is holding back on, this should be a red flag for you. When Jeremy and I negotiate a deal with owner finance, we always tell them that we shoot from the hip and hold nothing back and we expect the same from the seller or the deal is dead. My gut tells me that there is more here than meets the eye. Proceed with caution or back out. Just my 2cents for you to consider...Jan
Not too familiar with Baltimore other than 'The Wire' and going downtown one time for some seafood and an Orioles game, but if it seems fishy, then it is fishy.
If you've got money to burn and you know its a high crime area that you believe or know is in the stages of gentrification and revitalization, then I say go for it if its a long term investment. But other than that, why rishk getting shot when you're about to pick up your rent???
I am thanking you for your advice and support. I will keep you informed as I move forward. Knowledge truly is power!