question on foreclosed multi-unit property

Background – I currently own 4 rental houses… closing on #5 later this month.
Banker we deal with for financing tells me when he was looking at house #5 that they have foreclosed on a 12 plex in a nearby town.
He sends me some information on the property and by my estimation the rents are pretty low for 2br apt 20 miles from a big city ($425)… but only 2 of the 12 units are currently occupied (of course he says with the proper management it should be close to full)…

My issue: while I have some experience with SFH (about 3 years) and would like to get into some multi-family units at some point (and I had figured I would start with a 4 plex also)… I am concerned about 2 of the 12 units being rented and having enough cash to support the property until the repairs (I’m assuming) can be made and can start getting more units rented.

My proposed solution: go investigate the town and other multi-family units to see if they are full and what they are getting for rent…evaluate growth of city and major employers in area. Inspect complex and get an idea for what underlying issues are – is complex in bad neighborhood, units outdated, etc.

Why I started this thread: Has anyone ever talked with the bank who has the foreclosed property about deferring payments for 1 year? This would allow me to get repairs made and get units occupied without a huge financial worry during the short term. Or are there any other creative financing deals I could research?

Any thoughts appreciated about how others have handled/or would consider handling a similar situation…


get after it.

Sounds like you have a plan. Check it out. Get it cheap. Just get enough financing to cover the rehab costs.

Sounds like a deal.

Sounds like it’s time for you to take on some multi family property. I’ve never heard of a lender holding payments for the borrower. Also, you would need to get a commercial loan since it’s more than 4 units, so hopefully your banker can do that.

I would call a few property managers and find out what the market rent is for that area. You can also use the free sites like Rent-O-Meter to get an estimate as well. But it sounds like the property needs work will take some time to get occupied. Just be sure to get a rough estimate on the repairs needed that way you can make a better decision.

The bank is the one with the problem. If you want to take on their problem let them fund the effort.

Agree terms and conditions that are aligned with getting the place operational.

Do your homework before starting so you know what is reasonable for occupancy in the area. While the rents might be below market, do not be in a rush to nail the market rate. You want to get the place rented, you want to pick quality tenants and you do not want to work for free. Agree with the lender a loan term that makes sense without maximum rents.

If they will not deal, be prepared to walk. It is only a deal for you if the numbers work for you.