20 Year Old Purchasing First Portfolio - Seeking Advice

[Daniel Kaplan]

Hey everyone!

After countless hours of cold calling, I believe I came across a gem of a deal. I am in communications with an individual who is looking to liquidate some of his portfolio as he is completing a hotel acquisition. This is an off-market deal located in Milwaukee, WI. The units are all completely occupied and cash flowing day one. It is 3 duplexes, renting for 1950, 1600, and 1500. Here are the numbers on the purchase of the portfolio:

Some assumptions - 50% expenses, 70% LTV (DSCR Loan), $4500 origination fee for DSCR loan, interest rate of 7.12%, 30 year am.

Let me know your thoughts as I would love any advice here! (side note - LtL annualized = $20,779 if we went section 8 route. However, would need to put money in to get up to code for s8 standards).

Portoflio
Purchase Price	$230,000.00	Could be $225k
Down Payment	$69,000.00	30%
Legal/Closing Costs	$4,500.00
Mortgage	$161,000.00
Interest Rate (%)	7.12%
Number of Years	30
Income	$60,600.00
Expenses	$30,300.00	50%
NOI	$30,300.00
Mortgage	$13,009.72
Cash Flow	$17,290.28
DSCR	2.329027404
GRM
Cap Rate	13.17%
Break-even Ratio	71.47%
Cash on Cash	$17,290.28	23.52%
Total Return	$17,290.28	23.52%

[Randall Alan]

Quote from @Daniel Kaplan:

Hey everyone!

After countless hours of cold calling, I believe I came across a gem of a deal. I am in communications with an individual who is looking to liquidate some of his portfolio as he is completing a hotel acquisition. This is an off-market deal located in Milwaukee, WI. The units are all completely occupied and cash flowing day one. It is 3 duplexes, renting for 1950, 1600, and 1500. Here are the numbers on the purchase of the portfolio:

Some assumptions - 50% expenses, 70% LTV (DSCR Loan), $4500 origination fee for DSCR loan, interest rate of 7.12%, 30 year am.

Let me know your thoughts as I would love any advice here! (side note - LtL annualized = $20,779 if we went section 8 route. However, would need to put money in to get up to code for s8 standards).

Portoflio
Purchase Price	$230,000.00	Could be $225k
Down Payment	$69,000.00	30%
Legal/Closing Costs	$4,500.00
Mortgage	$161,000.00
Interest Rate (%)	7.12%
Number of Years	30
Income	$60,600.00
Expenses	$30,300.00	50%
NOI	$30,300.00
Mortgage	$13,009.72
Cash Flow	$17,290.28
DSCR	2.329027404
GRM
Cap Rate	13.17%
Break-even Ratio	71.47%
Cash on Cash	$17,290.28	23.52%
Total Return	$17,290.28	23.52%

@Daniel Kaplan

It's hard to tell what we are looking at here because there is the category of "Expenses" that isn't defined as to what is in it.  Is this your property insurance?  Is this your Property taxes?  Is this your maintenance reserves, etc, etc?   Have you accounted for your property taxes resetting once you buy it?

Before all that, though, the purchase price looks suspect.  Are you sure he isn't wanting $230,000 PER DUPLEX? I obviously don't know Wisconsin real estate prices living in Florida.  But 3 duplexes for a total of $230,000 doesn't sound right in today's economy.  If it is, awesome for you!

I picked Minocqua as a ballpark location in WI, and the properties I saw were selling for $140/sf.  If you took that as a reference point, and made an assumption that each duplex unit was 800sf...that would give you 4800sf of rental space, and at $140/sf, you might expect it to sell for $672,000... interestingly just about triple what you think you are buying the three for.  Until you tell me otherwise... I'm guessing that you are using the "per building" price, versus the "total of all 3 price".

Prove me Wrong!  :)

Hope you found a needle in the haystack!

Randy