Friday, July 2, 2010

Sub2 And Multifamily Income Property

I'm in the throws of "master lease option" negotiations on two mid-sized apartment buildings in California.

One building has low rents and the other has missing rents. One seller wanted to know what happens to his credit if I missed a rent payment. The other one objected that I was making no guarantee that I would refinance before his loan came due.

These are great objections, because once they are met, then we get that much closer to a deal.

There's more.

I've re-learned never to negotiate over the phone. I was sandbagged on the phone two days ago by a seller who insisted they I tell him what I was going to offer him right then.

This was my second phone conversation. The first time I talked with him, I mentioned the out of state units that are presently master leased. He didn't flinch. However, this time, he was impatient to literally tell me to "go to....(a hot place down under), if I was going to suggest a master lease with him!"

Well, I'm used to flat rejections, but this is a time to remember that telling a seller over the phone what you want to do without first putting something in writing is a mistake. We need to make the offer in writing first (even if it's a letter of intent), and at worst followup on the phone after first submitting something in writing (with all the objections handled in writing).

It's all about the order of things.

Interestingly, I'm still gathering up potential objections to study. So the worse the seller's attitude is, the more I'm gathering ammo for my next "objection-meeting" presentation. The question I'm asking myself today is what my limit is on the security deposits? My thought was to offer only one or two month's worth of mortgage payments.

However, this one project is so underwater, that any money I give the seller is just money I can't use to cosmetically upgrade the project, keep it current, and make it more marketable. Hmmm.

Meanwhile, I'm sending out more letters this week to the same group of sellers I found online, and in my driving two months ago.
Anybody care to give me advice here?

Meanwhile if you would like to know more about taking over loans, getting the title, without credit or cash, click this sentence.

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