If you’ve ever tried to sell a multifamily property in the past, you know how difficult it can be to find the right end buyer. Whether you choose to work with an agent or attempt to sell the property yourself, it’s not too unusual for multifamily properties to sit on the market for months at a time since they are being marketed to investors, not regular homeowners. If you chose to read this article because you’re tired of dealing with time wasters and want to find out how you can creatively structure a deal to get an offer for above market price, you’ve come to the right place. Read on to find out how an older couple in Jersey City was able to completely turn their losing investment around by structuring the best possible deal with an investor.
“Creativity requires the courage to let go of certainties.”
George and Rita Goldberg are the living embodiment of the American dream. After excelling in their respective careers in Law and Medicine, they built up a substantial reserve of capital over the years and decided to invest in Real Estate after reading Rich Dad Poor Dad and attending numerous seminars on how to invest in Real Estate. After researching their local market in Jersey City, they decided to pour all their funds into an 8 unit multifamily property in Jersey City.
Unfortunately, things were not as easy as the seminars made it seem and the Goldbergs found that despite all the research they had done, they still weren’t adequately prepared for the daily stress of property management, causing the property to fall into disrepair. Even more troublesome, as the years went on and the property’s condition continued to deteriorate, the quality of the tenants declined along with the property, bringing a whole host of new problems as the aging couple struggled to collect rent and pay all their bills on time. At this point, the Goldbergs weren’t losing money, but they also weren’t earning enough to justify the added stress of property management to their busy lives. They tried selling their property numerous times but they never got the $1,000,000 asking price they were looking for.
This is where Eddie, a local investor came in and proposed a solution: He would lease their option for 3 years, and purchase it immediately afterwards for $1,100,000. To accomplish this, he would pay them a monthly sum equivalent to what they were currently receiving while also offering to handle everything related to property management and renovations/repairs in exchange for control of the property. He worked diligently to improve the property through capital improvements, better tenant management, and meticulous expense tracking.
3 years later, Eddie has increased revenue by over 55% and exercises his option to purchase the property for $1,100,000. For the Goldbergs, this deal was a lifesaver because it allowed them to focus on their careers AND earn extra income on their property without making any sacrifices. Since the day George Goldberg’s grandfather immigrated to the United States, his family had dreamed about becoming self-made millionaires. Now, 20 years and 2 kids later, the Goldberg’s dream is a reality.
“What you get by achieving your goals is not as important as what you become by achieving your goals.”
It’s all rather simple when you really sit down to think about it. The couple couldn’t find a buyer for their 8 unit property because very few people have the cash on hand or the necessarily credentials to qualify for a loan of $1,000,000 or more. Rather than let the property sit on the market and continue to be a hassle for the aging couple, Eddie’s proposal to lease the property for a period of time before buying it is mutually beneficial because it provides both parties exactly what they are looking for. The Goldbergs get to turn over property management duties to Eddie by leasing it to him and only him. They’re still making money and receiving a sweet check at the end of every month, only now they don’t have to lift a finger to manage and maintain the building. At the end of the 3 year lease period, Eddie, having spent the 3 years diligently raising the necessary funds, now has enough to buy the building outright for above the $1,000,000 asking price the Goldbergs initially gave. One of the most satisfying feelings in life is structuring a true Win-Win deal and this is what both Eddie and the Goldbergs walked away with. If you want to learn more about how to creatively structure deals to maximize the value of your property, please give us a call at 551-236-3325 or fill in the “contact us” section below.
Written by Brandon Lor