Package Deal, My First Deal, and Maybe Out of My League?

6 Replies

I've spent the last few months reading, learning, and marketing to start a wholesaling business. My goal has been to start wholesaling in order to learn the marketing and eventually be able to acquire properties into my own portfolio for long-term holds and also fix-n-flips (love love love construction-related projects, so this is a goal of mine...).

That said, I have talked with many sellers, been hung up on many times and cussed out at least once.... so I figure I'm on the right track as far as making the right offers, etc. Haven't found that truly motivated seller yet.

I spoke with a retired man in a nearby community the other night. (important detail: the nearby community is a distant suburb but not the most popular suburb. I'd say it is steady, but not growing like some of our other areas.) He has a package deal - he wants to clear out his portfolio of 25 properties as a package deal. You could imagine that's a little intimidating for my first deal :-)

Alleged value of the 25 properties is $1,300,000

Seller started his talking at $1,000,000. 100% occupancy and rents bring in $13k per month. 

What are your initial thoughts? My initial desire was to find ONE house to wholesale, though I've never been opposed to building a portfolio.

Wondering what my entry and exit strategies could be.

Entry ideas: Owner financing, bank financing (portfolio loan?), private money, partnership, could move on all or negotiate for just a portion of the portfolio

Exit ideas: Sell some, sell all, hold all, sell as turnkey investments

Appreciate your input, and I understand many of the details aren't here. If I desire to move forward, my plan would be to get a list of all 25 properties, run numbers on values, rents, etc, and what a great price would be (goal of 30% immediate equity).

Michael

I would highly recommend you partner up with someone on this one in your local area. Find someone who can mentor you and you could incentivize it with offering 50% of the net profits whichever route you go. Good luck!!!

Colin Smith, Real Estate Agent in CO (#ER.100052152)
719-232-6709

In the one conversation I've had with him so far, he is selling because he is retired, but still has the "job" of managing these properties via his phone. He wants to chill out with his million bucks (minus taxes).

I do find it a little curious that he is willing to take a million dollar payout and take the huge tax hit. Should that make me suspicious? 

He is open to questions and willing to answer them honestly, so it seems. Obviously I'll trust but verify, but I appreciate everyone's input on best questions to ask and issues to understand.

people buy and sell for a "million" reasons so I personally wouldn't be suspect. It sounds like a good opportunity on blog paper. 

Seller financing may be the perfect exit strategy for this guy assuming he's ok waiting on his lump sum. 

Maybe a short term note with a balloon in a few years?

At that point you've raised some rents, made sure you're stabilized, and are the perfect refi customer to a commercial bank or maybe a B2R component. 

Partnering or finding a mentor to assist may be a great option if you're still getting your feet wet...

HI Michael! 

I would suggest thinking about your short term plans here vs long term. Are you planning on wholesaling to find deals to hold?

Perhaps you could structure a seller finance deal, then sell some of them off and keep the gems?

Would you want to manage this portfolio if you have the opportunity? That could be a full time gig in itself!

Best of luck, sounds like a great guy to know!

Steve

Originally posted by @Steve Baldwin :

HI Michael! 

I would suggest thinking about your short term plans here vs long term. Are you planning on wholesaling to find deals to hold?

Perhaps you could structure a seller finance deal, then sell some of them off and keep the gems?

Would you want to manage this portfolio if you have the opportunity? That could be a full time gig in itself!

Best of luck, sounds like a great guy to know!

Steve

 Thanks for the replies!

I have definitely considered this idea - selling some off and keeping the gems.

I don't have a property manager solution at this time but I'm confident I can't manage it myself in the midst of everything else I have going on. I do have some options, but just not certain of any of them at this point.

Any other suggestions on questions for seller in order to start my due diligence?

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