An apartment or multifamily property foreclosure is an unfortunate circumstance for the current owner and borrower.  But, it can be a great opportunity for another apartment & multifamily investor looking for a bargain purchase of a great cash flow property.  True, there may be problems in condition and cleanliness due to a period without tenants, but the offsetting bargain price can make all the difference.

Assuming the mere fact that it’s a foreclosure makes it a poor investment candidate is far from accurate.  Apartment & multifamily projects go into foreclosure all of the time, and reasons and motivations of the concerned parties can create all sorts of situations and opportunities.  In examining the situations and motivations of those involved in an apartment or multifamily foreclosure, the smart investor can ferret out profitable properties.

The Mortgaged Owner Losing the Property

Though it can be the case, the assumption that the owner losing the property is in this situation due to poor cash flow or problems not economically correctable is not accurate in many cases.  Sometimes the owner has gotten into a situation with other less profitable or negative cash flow investments, and can no longer continue without bankruptcy.  The foreclosed property in this case may be cash flow positive, and a factor in their ability to hold out until the current crisis.

It could be that there has been an increase in vacancies due to property condition and poor management.  But, if the condition items or management issues can be corrected at reasonable cost, negotiations with the foreclosure lender can gain concessions that make this a profitable apartment or multifamily investment.

The Lender

Motivation here is obvious.  Lenders make money loaning money, not managing apartment & multifamily projects.  The lender wants this property off the books as quickly as possible.  Unlike a single family home that can just be boarded up and ignored, there could still be tenants and some cash flow, so management headaches are present as well.

The Foreclosure Investment Buyer

Again, no mysteries here.  The apartment & multifamily foreclosure property buyer is looking for a bargain purchase with excellent future cash flow.  The ability to accurately identify costs and mortgage requirements to reach that positive cash flow point is crucial.  But, outlining the issues and costs during the negotiations can result in price or financing concessions from the lender that will make the deal happen.

Apartment & multifamily foreclosure purchase opportunities are out there.  Don’t let misconceptions deter researching them.

Karen Hanover, CCIM Candidate
Apartment Education Institute, President

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