Just got a 50+ unit portfolio under contract, next steps?

Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes

A couple GPs and I just got a 50+ unit portfolio under contract. We aren't new investors (we own about 60 units combined), but this is by far our largest acquisiton. What are some of the top due diligence items you would do on a portfolio this size? We appreciate the insight.

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Marcus Auerbach

Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes

Quote from @Bob S.:

Quote from @Marcus Auerbach:

Quote from @Andrew Freed:

@Bob S. - Yes, we have 60 units across all of us but all of them are 2-6 unit properties, smaller stuff. I suppose it's the same due diligence but its almost double our portfolio in one deal. Just a ton of stuff to tackle and aiming to get insight from other people who have done due diligence on a larger deal like this.

That's the issue when you buy a portfolio. There are no real shortcuts. You'll have to pay for 50+ inspections, which means multiple inspectors and then read 50+ reports and negotiate them. The only way to streamline is to inspect 10 units full and the rest high level (the big ticket items: foundation, roof, windows etc) and then extrapolate to the full portfolio. But when you look at the potential risks, you are quickly back to 100% inspection.

Inspection reports? Hmm I have done 100s and 100s and 100s never getting an inspection. Heck I have purchased many without ever getting inside. IMO if you need an inspector to tell you what's needed, well you should not be in the business. We walk props in 20 min , gather our numbers, make and offer can close.

All the best

That's good for you Bob. But obviously Andrew has not done 100s and 100s of deals. And even you got started at some point and did not have the necessary experience. Did anyone tell you, you didn't belong in the biz? We all started as noobs, we had a lot of help along the way and now we are paying it forward.

Frankly I still learn new stuff every time I attend an inspection, and heck, I have two engineering degrees and attended and negotiated more home inspections than I can count over the last 10 years; so personally I am satisfied with my own inspection, but for anyone who does not have the experience (yet), it's better to hire a pro.

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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
3y
Quote from @Andrew Freed:

A couple GPs and I just got a 50+ unit portfolio under contract. We aren't new investors (we own about 60 units combined), but this is by far our largest acquisiton. What are some of the top due diligence items you would do on a portfolio this size? We appreciate the insight.

Are these single family assets, what type of product are they? Where are they located?
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Bob S.
Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
3y
Quote from @Andrew Freed:

A couple GPs and I just got a 50+ unit portfolio under contract. We aren't new investors (we own about 60 units combined), but this is by far our largest acquisiton. What are some of the top due diligence items you would do on a portfolio this size? We appreciate the insight.

I am confused, you already have 60 units and you're asking what to do hmm..... really not sure what else to say but close.
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Andrew FreedBusiness Member
OP
Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes
3y
@Chris Seveney- The units are across twelve properties and in Massachusetts. They are multifamily ranging from a 3 to 8 units each.

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Andrew FreedBusiness Member
OP
Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes
3y
@Bob S. - Yes, we have 60 units across all of us but all of them are 2-6 unit properties, smaller stuff. I suppose it's the same due diligence but its almost double our portfolio in one deal. Just a ton of stuff to tackle and aiming to get insight from other people who have done due diligence on a larger deal like this.
[email protected]781-964-3200 Podcast Guest on Show 69 Doors from ONE Real Estate Deal Using Other People’s Money
1 Reply
Bob S.
Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
3y
Quote from @Andrew Freed:

@Bob S. - Yes, we have 60 units across all of us but all of them are 2-6 unit properties, smaller stuff. I suppose it's the same due diligence but its almost double our portfolio in one deal. Just a ton of stuff to tackle and aiming to get insight from other people who have done due diligence on a larger deal like this.

Its the same DD just more of it LOL, Stop overthinking. If the numbers make sense to you, close. When I bought my 81 unit, I did the same DD as when I bought a SF, its all the same
Good luck
4 Reply
Marcus Auerbach
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
3y
Quote from @Andrew Freed:

@Bob S. - Yes, we have 60 units across all of us but all of them are 2-6 unit properties, smaller stuff. I suppose it's the same due diligence but its almost double our portfolio in one deal. Just a ton of stuff to tackle and aiming to get insight from other people who have done due diligence on a larger deal like this.

That's the issue when you buy a portfolio. There are no real shortcuts. You'll have to pay for 50+ inspections, which means multiple inspectors and then read 50+ reports and negotiate them. The only way to streamline is to inspect 10 units full and the rest high level (the big ticket items: foundation, roof, windows etc) and then extrapolate to the full portfolio. But when you look at the potential risks, you are quickly back to 100% inspection.
2 Reply
Bob S.
Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
3y
Quote from @Marcus Auerbach:

Quote from @Andrew Freed:

@Bob S. - Yes, we have 60 units across all of us but all of them are 2-6 unit properties, smaller stuff. I suppose it's the same due diligence but its almost double our portfolio in one deal. Just a ton of stuff to tackle and aiming to get insight from other people who have done due diligence on a larger deal like this.

That's the issue when you buy a portfolio. There are no real shortcuts. You'll have to pay for 50+ inspections, which means multiple inspectors and then read 50+ reports and negotiate them. The only way to streamline is to inspect 10 units full and the rest high level (the big ticket items: foundation, roof, windows etc) and then extrapolate to the full portfolio. But when you look at the potential risks, you are quickly back to 100% inspection.

Inspection reports? Hmm I have done 100s and 100s and 100s never getting an inspection. Heck I have purchased many without ever getting inside. IMO if you need an inspector to tell you what's needed, well you should not be in the business. We walk props in 20 min , gather our numbers, make and offer can close.
All the best
3 Reply
Dylan Speer
Investor · Denver, CO · Member since 2023 · 161 posts · 52 votes
3y
I'd make sure you have property management in order. One that can handle that size of portfolio.
2 Reply
Sherief Elbassuoni
Realtor · Bellevue, WA · Member since 2019 · 882 posts · 1k+ votes
3y
at least do system inspection (Roof, foundation, hvac/heating, plumbing, electric)
You may consider skipping inspection for minor stuff like kitchen cabinets, ...
4 Reply
Scott Mac
Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
3y
Walk every unit with an ipad, make written notes and pics of what each unit needs re upgrades--match that to remaining rental contract length.
Have a professional inspection done, with a sewer cam, also be aware if anti backflow devices have been installed, and where they are at (exactly where they are at).
Pay attention to the electrical system in the inspectors report.
Walk the entire lot with the ipad and make written and pic notes of things you must improve, want to improve.
You will need to have fixup dollars estimated for the needed repairs and upgrades.
You may have to pay a General Contractor to walk with you to give you estimates.
That's just a few things off the top of my head--there are many more.
Good Luck!
4 Reply
Jon McCarron
Real Estate Agent · Salem, MA · Member since 2014 · 114 posts · 78 votes
3y
Hey @Andrew Freed
No advice from me, just a huge congratulations!! Hope it all works out, you're crushing it!
2 Reply
Sarah Ziehr
Real Estate Broker · Chicago, IL · Member since 2015 · 531 posts · 266 votes
3y
Do the numbers currently work on each property? Since this is a portfolio, I assume there are some winners in there as well as some losers. I would make sure that you fully understand the risks of the losers. Who was managing the properties? You could find out a lot from this person. I would find out as much about the seller as possible. What was their motivation to selling? Are there outstanding code violations on any of the properties? Have insurance claims been filed? What is the crime like in each of the areas? Look closely at vacancy rates and rent rolls.
5 Reply
Jason BottPro Member
Insurance Agent · Nationwide · Member since 2014 · 2k+ posts · 1k+ votes
3y
Quote from @Andrew Freed:

A couple GPs and I just got a 50+ unit portfolio under contract. We aren't new investors (we own about 60 units combined), but this is by far our largest acquisiton. What are some of the top due diligence items you would do on a portfolio this size? We appreciate the insight.

The insurance will need to be quoted out based on 2023 rates, and anything your lender may require. The worst I have seen this year is the buyers insurance was 3x what the seller listed.
4 Reply
Steve K.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
3y
Just curious, what is your financing looking like on these (if you don't mind sharing, I've been looking into something similar here and financing has been tricky, to say the least...)?
2 Reply
Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
3y
With an apartment community, the PMs contractors would usually handle this but that's not your situation. I recommend talking with your home inspector and have a defined scope engagement to inspect the roof and mechanicals with a basic Word doc write up of issues. The broker, inspector, and I walked the units together. There was a lot of down time for me but we knocked it out real time on the spot. I've done this before and I think the cost was around $50 per unit (and the seller concessions based on the findings paid for it many times over).
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Andrew FreedBusiness Member
OP
Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes
3y
@Steve K. - Still get quotes, but we are aiming for 20-25% down @ a 5.75% 30 year amortization, 7 year ARM with about $250K of seller credits. We will ask for the first 12 months to be interest only and perhaps construction funds if desired.
[email protected]781-964-3200 Podcast Guest on Show 69 Doors from ONE Real Estate Deal Using Other People’s Money
1 Reply
Steve K.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
3y
Quote from @Andrew Freed:

@Steve K. - Still get quotes, but we are aiming for 20-25% down @ a 5.75% 30 year amortization, 7 year ARM with about $250K of seller credits. We will ask for the first 12 months to be interest only and perhaps construction funds if desired.

Wow, we're looking at 40-50% down, ~8%, 5 or 10 yr ARM, ammed over 30, P and I only.
1 Reply
Marcus Auerbach
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
3y
Quote from @Bob S.:

Quote from @Marcus Auerbach:

Quote from @Andrew Freed:

@Bob S. - Yes, we have 60 units across all of us but all of them are 2-6 unit properties, smaller stuff. I suppose it's the same due diligence but its almost double our portfolio in one deal. Just a ton of stuff to tackle and aiming to get insight from other people who have done due diligence on a larger deal like this.

That's the issue when you buy a portfolio. There are no real shortcuts. You'll have to pay for 50+ inspections, which means multiple inspectors and then read 50+ reports and negotiate them. The only way to streamline is to inspect 10 units full and the rest high level (the big ticket items: foundation, roof, windows etc) and then extrapolate to the full portfolio. But when you look at the potential risks, you are quickly back to 100% inspection.

Inspection reports? Hmm I have done 100s and 100s and 100s never getting an inspection. Heck I have purchased many without ever getting inside. IMO if you need an inspector to tell you what's needed, well you should not be in the business. We walk props in 20 min , gather our numbers, make and offer can close.
All the best

That's good for you Bob. But obviously Andrew has not done 100s and 100s of deals. And even you got started at some point and did not have the necessary experience. Did anyone tell you, you didn't belong in the biz? We all started as noobs, we had a lot of help along the way and now we are paying it forward.
Frankly I still learn new stuff every time I attend an inspection, and heck, I have two engineering degrees and attended and negotiated more home inspections than I can count over the last 10 years; so personally I am satisfied with my own inspection, but for anyone who does not have the experience (yet), it's better to hire a pro.
6 Reply
Bob S.
Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
3y
Quote from @Marcus Auerbach:

Quote from @Bob S.:

Quote from @Marcus Auerbach:

Quote from @Andrew Freed:

@Bob S. - Yes, we have 60 units across all of us but all of them are 2-6 unit properties, smaller stuff. I suppose it's the same due diligence but its almost double our portfolio in one deal. Just a ton of stuff to tackle and aiming to get insight from other people who have done due diligence on a larger deal like this.

That's the issue when you buy a portfolio. There are no real shortcuts. You'll have to pay for 50+ inspections, which means multiple inspectors and then read 50+ reports and negotiate them. The only way to streamline is to inspect 10 units full and the rest high level (the big ticket items: foundation, roof, windows etc) and then extrapolate to the full portfolio. But when you look at the potential risks, you are quickly back to 100% inspection.

Inspection reports? Hmm I have done 100s and 100s and 100s never getting an inspection. Heck I have purchased many without ever getting inside. IMO if you need an inspector to tell you what's needed, well you should not be in the business. We walk props in 20 min , gather our numbers, make and offer can close.

All the best

That's good for you Bob. But obviously Andrew has not done 100s and 100s of deals. And even you got started at some point and did not have the necessary experience. Did anyone tell you, you didn't belong in the biz? We all started as noobs, we had a lot of help along the way and now we are paying it forward.
Frankly I still learn new stuff every time I attend an inspection, and heck, I have two engineering degrees and attended and negotiated more home inspections than I can count over the last 10 years; so personally I am satisfied with my own inspection, but for anyone who does not have the experience (yet), it's better to hire a pro.

He has done 60, so I would say he is experienced .YES 100% if you do not have any experience get an inspection OR have your team member walk it. The post does not make sense to me. He is asking what to do when he already purchases 60,,,,,
All the best
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Nicholas D.Pro Member
Investor · New Bedford, MA · Member since 2016 · 100 posts · 39 votes
3y
@Andrew Freed
Congratulations! By chance is this portfolio located in the Southeast Southcoast portion of MA?
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Nicholas D.Pro Member
Investor · New Bedford, MA · Member since 2016 · 100 posts · 39 votes
3y
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Devin Scott
Member since 2019 · 38 posts · 45 votes
3y
Quote from @Bob S.:

Quote from @Marcus Auerbach:

Quote from @Andrew Freed:

@Bob S. - Yes, we have 60 units across all of us but all of them are 2-6 unit properties, smaller stuff. I suppose it's the same due diligence but its almost double our portfolio in one deal. Just a ton of stuff to tackle and aiming to get insight from other people who have done due diligence on a larger deal like this.

That's the issue when you buy a portfolio. There are no real shortcuts. You'll have to pay for 50+ inspections, which means multiple inspectors and then read 50+ reports and negotiate them. The only way to streamline is to inspect 10 units full and the rest high level (the big ticket items: foundation, roof, windows etc) and then extrapolate to the full portfolio. But when you look at the potential risks, you are quickly back to 100% inspection.

Inspection reports? Hmm I have done 100s and 100s and 100s never getting an inspection. Heck I have purchased many without ever getting inside. IMO if you need an inspector to tell you what's needed, well you should not be in the business. We walk props in 20 min , gather our numbers, make and offer can close.
All the best

we are all very impressed.
0 Reply
Andrew FreedBusiness Member
OP
Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes
3y
@Nicholas D. - No it is not.
[email protected]781-964-3200 Podcast Guest on Show 69 Doors from ONE Real Estate Deal Using Other People’s Money
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Nicholas D.Pro Member
Investor · New Bedford, MA · Member since 2016 · 100 posts · 39 votes
3y
@Andrew Freed ah I see, either way Congrats on the big contract and doubling the portfolio!
Also enjoyed listening to the Podcast, its refreshing seeing/hearing people talk about properties that we typically see in our area....small multifamily early 20th century balloon-frame builds.
1 Reply
Andrew FreedBusiness Member
OP
Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes
3y
@Nicholas D. - Thanks Nick, we work with what we got in the Northeast lol.
[email protected]781-964-3200 Podcast Guest on Show 69 Doors from ONE Real Estate Deal Using Other People’s Money
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