15 homes in one loan...how

7 Replies

While doing a video walk through on a potential purchase the owner stated she had 15 off market deals she would be willing to package together All are rented and here is the overall deal:

3 duplex style homes

12 SFR

$880k purchase price

$8350 current rent roll. All tenanted.

My PM stating we can get them up to $11500. 

Need recommendations for loan on the package deal. Would like to purchase, increase rents and refi entire package 2-5 years down the road.

8350/15 = very scary to me.  $566 per unit per month average.  Sounds like a crack house to me.

And stating you ‘could’ get $11,500 a month is pie in the sky.  You will either turn over a lot of tenants and/or do a lot of renovations.  Your pick.  You are assuming the previous owner hates money and never wanted to rock the boat and raise rents.  Don’t be fooled here.  Your average tenant can’t afford a $200 per month increase in rent AND still buy their crack.  ;-)

As far as how to bundle them:  easy.  Owner finance is the most probable.  Otherwise you are looking at a commercial loan.

Best of luck on this one.  You will probably need it.

@Alan Grobmeier I agree that the price point sounds scary. I have three in this area already and they are quality ppl and tenants. Factory workers outside of Indianapolis. This bundle has been well maintained by a real estate professional so they are a quality tenant as well. I agree that they wont be a quick increase in rents but the area, purchase price and long term potential is pretty solid. 

Have you worked with any commercial lenders that you can recommend?

@Micah Shelton , I am strictly a SFR type of guy. But I do know that commercial lending will cost you a LOT more. You can try @Jay Hinrichs .  He's in your neck of the woods.  If nothing else, he might be able to refer you to someone.

880k is not an easy deal, especially if the owner wants to be completely cashed out. You are probably looking at an interest rate north of 6%, even if you have 20% down. Your best bet would be to try to get some owner assistance here, have them carry back a note on part of it.  Then finance the rest.  It doesn't look like it cashflows to me, depending on taxes, insurance, water, sewer, trash.  If it does cashflow, it seems very thin, especially when divided by that many doors.  

Based on your numbers, it is difficult to believe that the tenants are factory workers.  Based on the price of rent, they might be making $2000 a month gross income?  Seems a little low for me for a factory worker when minimum wage is around $10 an hour.  Then to take them to $766 a month, on the average, seems pretty steep.

@Micah Shelton , I just realized that this is 18 doors!  That's $463 a door rent.  How are these properties NOT D/F?

I hope you own at least a taser.  ;-)

I'm thinking that this deal is 'off market' because no one in their right mind would buy it.  Let alone at 880k.

@Alan Grobmeier   at first I thought these properties were in Portland metro.. but then land alone would be worth 1.5 mil or more.. the small commercial banks in the area might do this.

Originally posted by @Micah Shelton :

@Jay Hinrichs I know we are in the same area. You worked with one of my colleagues Jeff Wallenius a few years back. I’d love to pick your brain on this package deal out in Indiana if that’s possible. 

U can hit me off line