Is owner financing someone else's portfolio a good ideal

[Zach Crabtree]

My father (62) is offering me to buy 31 mostly single family properties. 30 units are occupied and all in different stages of condition manly C level. He is offering a relatively low payment but it would be open ended/ until him and his wife (49) pass. Do you all think this would be a good option knowing there is no payoff option?

[Kevin Sobilo]

@Zach Crabtree, a few thoughts:

1. A very good and interesting question and a VERY interesting way to pass property down. 

2. I would probably compare it to other scenarios and use 3 different time horizons for each scenario to see how fair this offer is for you. 

3. The time horizon of payments sounds like it would be 20-40 years based on the wifes age. A simple thing to compare it to would be what you would pay to bull the property at full market value with a mortgage of 20, 30, or 40 years. 

If the payment is LESS than you would pay on a mortgage for 40 years, its a pretty solid winner, I think. If its between the 30-40 year mortgage then its iffy. If the payment is MORE than a 30 year mortgage, then NO because you could just buy a comparable portfolio cheaper. 

4. Another way to look at it to reverse engineer the income for your father and his wife!

How much money would it take to buy an annuity that would give your father/wife the income he wants for the rest of their lives? 

Is that amount LESS than what you would be willing to pay for the property? If so, maybe, just offer to buy the property for that price so he can simply buy the annuity!

5. Option #4 isn't quite that simple because the taxes involved in a sale would have an impact as well. 

6. If you care to provide the fair market value of the portfolio, total rental income per month, and how much your father wants in a lifetime payment people can probably give more specific guidance.