One example of how our expertise pays off in significant ways to our sellers is illustrated by this recent multi-family transaction that Maria Skipper, Bella Grande Properties Principal Broker, facilitated. Maria represented the sellers exclusively throughout the conveyance of this 8 unit property.
An acceptable offer was secured and the buyer’s lender ordered an appraisal on the property. The appraisal came back $170,000 under the contact price. The buyer wished to renegotiate down to the current appraisal value. After much discussion, Maria advised the sellers that since they owned the property free and clear, they could offer contract terms to a qualified buyer. Furthermore, she advised them that the buyer must have a large down payment in order to be considered, so that a significant sum of money would be forfeited if they defaulted on the installment note.
This strategy enabled us to combat a low appraisal of $510,000 and we secured an owner contract to sell the 8-plex for a grand total of $645,000.
The sellers now have a monthly income coming in for the next 15 years and are collecting the interest the bank would have been making on a new loan at a rate of 6% per annum.
We don’t let low appraisals get our sellers down! Call us to see how we can help you secure your next real estate investment. 503.351.4101
Multi-family Investment formulas and definitions
- Scheduled income: total income if 100% occupied.
- Effective gross income: income after anticipated vacancies and rent delinquencies deducted.
- Occupancy rate: actual income received divided by scheduled income. This will be expressed as a percentage.
- Gross Rent Multiplier: Sales price of asset divided by gross annual rental income.
- Net Operating Income: effective gross income minus expenses and reserves.
- Reserves: stabilized gross income minus vacancies and credit loss.
- Cap Rate or Capitalization Rate: net operating income produced by an asset divided by capital cost (original price paid to buy the asset).
