Called about a duplex, got offered a portfolio...

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Called about a duplex, got offered a portfolio...

Arron Robertson
Rental Property Investor · Trussville, AL · Member since 2017 · 6 posts · 0 votes

Hello all,

I am brand new to real estate investing looking to invest in value add multi family properties and I stumbled upon a deal that has a lot of potential. 

Let me start from the beginning.. After reading Rich Dad Poor dad I started listening to Bigger Pockets about 10 months ago and I've been trying to read and absorb as much as I can. I've narrowed down what types of properties I would like to invest in (as mentioned above) but I haven't had much success finding deals using typical avenues like: the MLS, Zillow, Craigslist, Loopnet, Etc.

Theres this duplex a couple blocks from my condo that's had a "for rent" sign up for about a year, so I decided to call the number on there to see if the owner would be interested in selling (since it seemed like he wasn't getting any tenants even though we live in a really good area). Also, it wasn't listed anywhere online for rent that I could find, so I figured this guy just didn't care. 

Fast forward to the "deal".. I ran some numbers on the duplex and had a price in mind so I called the owner. When I asked him if he was interested in selling he said "make an offer" which got me really excited, but then he followed up with "make me an offer on everything". "Everything" is 6 total houses (4 of them being duplexes). I told him I'd have to run some numbers before I could make and offer. I talked to my uncle (who's a Realestate agent) and asked his advice. He told me to try to get current rent rates, leases, etc from the owner, but when I called him back, he changed his tone and basically told me not to waste his time. 

So heres where I could use some advice. We would like to make an offer of somewhere around $850,000 for the whole lot, plus $60,000 in repairs.

How can someone with no real estate experience get a loan for almost $900,000? I have family and friends that have enough money to possibly take care of the down payment, but I wouldn't know how to structure the deal? 

I know this is a lot for my first deal, but I feel like I have to at least try to see where this can lead.

Any advice or guidance would be appreciated!

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Jim K.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
8y

@Arron Robertson

All right, Arron, I'm going to give you my only slightly varnished version of this: this dude's messng with ya. Ain't no one gonna slap a million bucks in real estate financing together, hey presto! without getting a commercial property loan. In order to get a commercial property loan, you, at the very least, are going to have to have extensive rental records of these places. What this dude is hoping for is a pie in the sky cashout in a hot economy, a green rich kid with WAY too much money at the peak of the market to call him, and maybe put up family money or mortgage daddy's business to buy the owner's portfolio of rotting lemons. Maybe the dude's just ready for the funny farm and you caught him after he took his meds and before he hit the hay for an afternoon snooze in the sweet arms of whatever smack he's on.

Seriously, you just asked the owner how much rent the portfolio takes in and he played big-man-don't-waste-my-time on you? That's not doing business, that's spreading it thick and heavy.

I have no idea how you, without a single deal under your belt, are looking at four duplexes and two SFRs sans inspection and coming up with a $60,000 repair figure that you are willing to risk almost a million bucks on. So we have two parties here that are not being wholly rational -- you due to inexperience, he due to opportunism.

Follow up. This is a business lead. But do not think of this as the supreme sweet deal of a lifetime to be solved if you somehow put together the 900K in financing. Could it happen? Of course. And monkeys could fly out of my butt, too, but somehow I doubt they will.

Figure out how to buy a portfolio, get the information you need, and then come up with your offer. DO NOTHING WITHOUT REAL NUMBERS TO NAIL DOWN A REAL OFFER.

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  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    8y
    Hope you have a lot of savings for that and awesome credit .
    2Reply
  • Jim K.
    Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
    8y

    @Arron Robertson

    All right, Arron, I'm going to give you my only slightly varnished version of this: this dude's messng with ya. Ain't no one gonna slap a million bucks in real estate financing together, hey presto! without getting a commercial property loan. In order to get a commercial property loan, you, at the very least, are going to have to have extensive rental records of these places. What this dude is hoping for is a pie in the sky cashout in a hot economy, a green rich kid with WAY too much money at the peak of the market to call him, and maybe put up family money or mortgage daddy's business to buy the owner's portfolio of rotting lemons. Maybe the dude's just ready for the funny farm and you caught him after he took his meds and before he hit the hay for an afternoon snooze in the sweet arms of whatever smack he's on.

    Seriously, you just asked the owner how much rent the portfolio takes in and he played big-man-don't-waste-my-time on you? That's not doing business, that's spreading it thick and heavy.

    I have no idea how you, without a single deal under your belt, are looking at four duplexes and two SFRs sans inspection and coming up with a $60,000 repair figure that you are willing to risk almost a million bucks on. So we have two parties here that are not being wholly rational -- you due to inexperience, he due to opportunism.

    Follow up. This is a business lead. But do not think of this as the supreme sweet deal of a lifetime to be solved if you somehow put together the 900K in financing. Could it happen? Of course. And monkeys could fly out of my butt, too, but somehow I doubt they will.

    Figure out how to buy a portfolio, get the information you need, and then come up with your offer. DO NOTHING WITHOUT REAL NUMBERS TO NAIL DOWN A REAL OFFER.

    6Reply
  • Michael StrobelPro Member
    Investor · Lynchburg, VA · Member since 2015 · 41 posts · 20 votes
    8y

    Ask him if hes willing to finance it himself. Offer him 900k @ 4% owner finance. SOunds like he wants out of the rental business. But Im sure he doesnt want out of the cash business. Try to convince him to do interest only payments for 5 years with the option to pay it off whenever you want before 5 years. Then that give to time to cash flow, save cash and get 5 years to get a loan for it. Or maybe you get it under contract to ballon in 5 years, but negotiate the terms to be you can pay off a singular property at a time once you fix it up, refinance it and get a new loan. 

    Sometimes you have to be really creative. Im fairly new (only 2 properties and 6 units) but Ive found there are a lot of potential sellers that are "bigger dogs" that kind of just yank your chain. Keep doing what your doing but dont force this deal. 

    Dont be afraid to start small, learn and grow slowly over time. 

    1Reply
  • Arron Robertson
    OP
    Rental Property Investor · Trussville, AL · Member since 2017 · 6 posts · 0 votes
    8y

    @Jim K.

    Thank you for your response! I can see where you're coming from about the guy "spreading it thick and heavy". I've definitely got some numbers to get more exact. I do think there's a strong possibility he just wants out of the game. Just from the state of the properties, the fact that he hasn't listed them for rent anywhere online, and the fact that he actually lives in one of the units. But like you said, he could also be trying to get rid of a "portfolio of rotting lemons". 

    if we do eventually make an offer, we'd for sure have contingencies pending having a home inspector and contractor giving us input.

    Thanks again!

    0Reply
  • Arron Robertson
    OP
    Rental Property Investor · Trussville, AL · Member since 2017 · 6 posts · 0 votes
    8y

    @Michael Strobel

    Seller financing is definitely a viable option! That's something I'm not as familiar with, so I'd have to do some more research. Also having two options going into a deal can be a great thing from what I hear.

    Thanks for the encouragement! 

    0Reply
  • Tony Mai
    Rental Property Investor · Los Angeles, CA · Member since 2016 · 137 posts · 80 votes
    8y
    I don’t think he’s being serious with you because don’t waste my time is very u professionals. if your motivated and are going to pursue the portfolio, make sure you get real numbers before you make an offer. it is not wise to take the seller at their word. Make sure you do your own due diligence.
    0Reply
  • Arron Robertson
    OP
    Rental Property Investor · Trussville, AL · Member since 2017 · 6 posts · 0 votes
    8y

    @Tony Mai

    Thanks for the response! I agree, I don’t think he took me seriously. I can sound a lot younger over the phone at times, and I am a newbie. 

    I do think him being unprofessional could be an advantage in some ways, but he could also be not willing to bend at all. 

    As far as due diligence, I feel like we’ve got a lot of the numbers figured out (or at least in the ballpark). The numbers I’m totally in the dark on are repair cost and also what his current leases are. 

    From my understanding, sellers (not just this guy) of properties this large, want to see proof of financing before they “waste” their time getting inspections done, or letting us look at the properties. Is my thinking accurate? 

    Thanks again!  

    0Reply
  • Sam Shueh
    Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
    8y

    If for lease sign in on for year, Red flag 1 he was not serious.  He should come with all the documentation and leases to show that he was sincere. That is Red flag #2. Did you ask about his credit score and actually searched these titles that he owned and are current?  I suggest you ask your uncle to represent you in person. Your relative should have the instinct to know if he is playing his game. 

    This has happened to many of us. Someone is playing with your mind. If the seller is not serious move on.....

    0Reply
  • Tony Mai
    Rental Property Investor · Los Angeles, CA · Member since 2016 · 137 posts · 80 votes
    8y
    Arron Robertson you could show the seller proof of funds and then request the leases documents again. It will at least put your mind at ease that you did what you could to show the seller your are serious.
    1Reply
  • Maurice D.
    Coppell, TX · Member since 2015 · 485 posts · 310 votes
    8y

    sounds just like the old man who wants 1,000,000 for his old fourplex in Grapevine. TX... non-negotiable he said...

    0Reply
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