6 rentals, gross $4400 per month, I would like to keep it for myself.

19 Replies

I found a package deal here in Atlanta.

6 rentals, fully occupied. 

yearly expenses = $14686

Monthly rents total = $4400

lower income area.

All of the houses are not far from where the Atlanta Beltline trl is scheduled to go

What do you guys think about the numbers?

and do you have any suggestions on how I (limited cash) could score this for myself?

I would NOT pay $897,601 for these. That's over 17 GRM!

@Bob Bowling Sorry I left out asking price which is 265K

Ve'Ron, I am not seeing the entire picture here... what is the cost of obtaining these rentals? Can you pick a property out individually or whole package? Yearly expenses are great to know, but you need to also know the debt service. Does the 1%+ rule (guideline) apply, do you have management included; who takes are of the lawn - is that included? How is the overall maintenance of the properties?

The reason I am asking all these questions is to have a better understanding of the deal. I'm willing to bet that if these properties are in lower income areas, capital expenses were very low if not zero for years, and this in turn will catch up with you.

While talking to the owner ask him/her if they would be willing to do owner carry, or you could try a lease option both of which could be accomplished with no or little money down. Do your homework and ensure the numbers work, and if they do, then you will find a way to make the deal work!

Best of luck!

@David P.  The cost is 265K. The actual cash involved will be based on terms the seller would be willing to accept. All of them are renovated. I have an option to purchase a single rental, but price will go up. I would have to do it myself or hire someone. I have never dealt with a rental before. This would be my first.

I will do more research.

Check out the property analyzer form on BP, or you can download the one I use.  

REI Property Analyzer - Version 2-1

Fill it out for each of the properties and see if the numbers work.  If you need help, please PM me.

You need the owner to carry 20% on a 5 year AM. A bank to cover 70% on a 20 year AM and you to have 10% cash.  The deal looks pretty good numbers wise.

@David P. - thanks for that tool... It's very handy!

@Bob Bowling - could you please elaborate on your statement for me? Where did the $897k figure come from, what is GRM, etc.?

Thanks!

@JAI COWARD

GRM - Gross rent multipler

@Bob Bowling  I am also interested to find out how you derived the figures, thanks

The expenses seem too low.  At $200/mo unit, one month vacancy and get ready expenses will be most of that, by itself.

Originally posted by @Jai Coward:

@David P. - thanks for that tool... It's very handy!

@Bob Bowling - could you please elaborate on your statement for me? Where did the $897k figure come from, what is GRM, etc.?

Thanks!

Gross rents $4,400 X 12 =$52,800 Times Gross rent multiplier of 17 = $897,600.  I threw in an extra dollar to the seller so he knows I'm serious.

@Bob Bowling - what does the multiplier mean, and why 17? Also, what does the $898k mean as a final figure?

@Tom Yung  

 @Jai Coward  

Sorry, guys just goofing on all the posts that have limited information yet 5 people jump in declaring how bad or good the deal is not even knowing the state location much less the needed financial information. 

GRM is a pretty easy way to ballpark a market value if you know comparable sales prices and rents. Here the asking price is ONLY 5 times the gross rents. Sounds VERY low especially when you see such LOW expenses. BUT if similar properties are selling for that and rents are similar then that is market. Sounds good unless you don't know that the market is on the way down and sellers are dumping properties. GRM's in San Francisco and Honolulu generally run in the mid teens to the mid twenties depending on the movement of the market.

@Bob Bowling

Thank you for explaining,  IMO, Your 17GRM probably is too high for a lot of area in south & low income area near the belt line from my limited knowledge of GA. I will recommend no more than 5 in most of those area unless they are more close to Atlanta center or Northern Atlanta

@Tom Yung  

Yes, I'd agree that 17 GRM is probably higher than what you'd find in most of the country. But since it is the MARKET that sets the GRM why do you think it would be so low in these areas? My experience in the Midwest (Ohio, Kentucky, & Indiana) is that 10ish GRM's are typical. I would not buy at a 5 GRM unless a was fairly sure the property wouldn't be selling at a 4 GRM in the next year.

Originally posted by @Ve'Ron Hall:

I found a package deal here in Atlanta.

6 rentals, fully occupied. 

yearly expenses = $14686

Monthly rents total = $4400

lower income area.

All of the houses are not far from where the Atlanta Beltline trl is scheduled to go

What do you guys think about the numbers?

and do you have any suggestions on how I (limited cash) could score this for myself?

Hi Ve'Ron,

I don't know Atlanta at all but stay away from anything higher than a duplex in C and D class areas.

Its very hard to make the numbers work with the folks in the lower socioeconomic areas.

Just my experience thus far.

Thanks and have a great day.

Please provide a solid definition for C & D areas. As well as A and B. Thanks. John

@Fitzgerald Hall  Sounds interesting to me. What many investors consider C & D in Atlanta are actually hot or soon to be hot markets.  There are many exceptions.    You have to be very familiar with the local area --- at a block level in some cases.

Exactly as Rick puts it....you have to know your local market.  What you're talking about appear to be inner city atlanta properties near the beltline...which may or may not prove to of any value.  You have to take those areas block by block to know whether you are in a war zone and whether the property will stay rented.  I'm never interested in gross numbers...I want net numbers.  What is in the "expense" number and how renovated are these properties.  Go see the properties and tenants for yourself....if you've never been a landlord before you honestly have no business buying a package.  Take a hard look at the interior conditions.  Pick the best property and try one.  I've been all over the country and inner city atlanta renters are pretty tough....they know how to work the system and they will trash your properties if you aren't careful.  It's one of the reasons that I switched everything that I do to shared housing..the returns make up for the headaches.  Happy Investing!

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