Multiple Rental properties in group package

3 Replies

I recently found a landlord that is selling 17 rental properties for $500,000 with owner financing. The owner wants 20% down so $100k and will carry the $400k. I'm working on getting more details from him. He did say they are 100% occupied right now.

I'm looking for advice on how to proceed on this and I know what the monthly rental payments are in the area. They should be around $500/mo depending on the property.

Thanks in advance.

What type of interest rate is the owner giving you?

You want to find out what your annual net operating income is. To do this take the number of units x monthly rent x 12. So if you have 17 units at $500 x 12 months would equal $102,000. Now you need to subtract your annual expenses. A good rule of thumb is 50% of your income. In this case it would be $51,000.

Now, let's say you are getting a 7% interest rate from the owner on a 30 year loan, your monthly payment would be $2661 or $31,932.

So, your net income after debt service would be $19,000.

Your cap rate would be 3.8%. That's your net income divided by the purchase price. But that is all hypothetical on your interest rate.

If he's asking $500,000 try offering a lower price to increase your cap rate. Find out why he wants to sell the property. T

And although they are 100% occupied now, make sure to account for vacancy. Probably between 5-10%.

I hope this helps a little....

The 50% rule should already account for vacancies though, keep that in mind. 

Originally posted by @Kellie Holly-Wood:

What type of interest rate is the owner giving you?

You want to find out what your annual net operating income is. To do this take the number of units x monthly rent x 12. So if you have 17 units at $500 x 12 months would equal $102,000. Now you need to subtract your annual expenses. A good rule of thumb is 50% of your income. In this case it would be $51,000.

Now, let's say you are getting a 7% interest rate from the owner on a 30 year loan, your monthly payment would be $2661 or $31,932.

So, your net income after debt service would be $19,000.

Your cap rate would be 3.8%. That's your net income divided by the purchase price. But that is all hypothetical on your interest rate.

If he's asking $500,000 try offering a lower price to increase your cap rate. Find out why he wants to sell the property. T

And although they are 100% occupied now, make sure to account for vacancy. Probably between 5-10%.

I hope this helps a little....

 Thanks for the reply! I had already figured out the net operating income like that. I have currently asked for more details on the properties. I used $500 as it was a good round number until I figure out how many are single bedroom, 2 bed room, etc as that will effect rent price. I am also waiting to hear back on what his terms are for the note. I definitely had the idea in mind of trying to get a lower purchase price.

I know the occupancy rate will change and wont always be 100% I had already taken that into account. I currently rent in the area where these houses are available and their is an extreme shortage in rental housing and I don't see that changing anytime soon.

My biggest concern with this deal if I do continue to pursue it and the numbers look promising, is coming up with the down payment. I don't have the $100k down payment. Any advice or suggestions on the best way to finance that amount. I'm currently thinking a private investor(s).

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