Lenders who will lend for 300k DP on 85 property portfolio

[Ryan Herald]

I have been given an opportunity to purchase a portfolio of 85 properties that each net ~$250 a month (if 80 are rented, 20k in net a month). The seller who is looking to retire is willing to finance the whole portfolio for 4% interest with 10% down (That comes to right at 300k).

Being new to this, I have enough saved to cover a reserve. Are there Hard Money lenders who will lend for a secondary lien? Or does anyone have any strategies on how to approach this. I have a few ideas, but I would appreciate any advice I can get before I post it.

TLDR: I have the cash flow to afford a loan to cover the DP, but I do not know who to go to get it.

[Victor Jernigan]

@Ryan Herald you are getting solid information from @Jay Hinrichs and @Jacob Pereira - it is an un-bankable transaction. The unit calculation of about $35K - regardless if it is apartment doors at $25K and houses at $45K -  makes this a low value asset with the potential of significant capital expenses. I also am just backing into your numbers, but at a net of $250 per month, one bad AC unit or roof repair will get most, if not all, of the annual income.

In most areas around Knoxville, properties such as these rent for $425-$550 per month - simple math $42,500 annual for the 85 units. If the total of mortgages, insurance and taxes is $20K as Ryan calculated, it is essential you accurately identify all of the operating expenses. If you are lucky, the owner has perfect records for the previous 3 years so you can actually check expenses. Most probably, he does not. (You may not believe this but sometimes and owner will get paid in cash - pay for repairs in cash and show the apartment as vacant.) 

Realistically the tenants are stressed in their daily lives and making rent payments is not their highest priority. Any vacancy rate will be understated until you add uncollectable rents and cost of evictions. Use a minimum of 10% and that still may not be enough - now $38,500. Because late payments will be at least 25% of your tenants, management expense is significant. If you do it yourself or hire it done, use a minimum of 10% in your calculations - now at $34,650. If the unit turn cost is $500 per unit, it is another $4,000 - now at $30,650. This leaves about $10K to cover all ongoing exterior maintenance repairs, plumbing issues, appliance replacement, yard work, plus creating a reserve for parking lots and roofs. Plus or minus a few thousand, it may be possible for the units to pay for themselves but it does not look like fun.

Finally, since I live in Knoxville, if the portfolio is North or Northeast, it is in coal country. A declining market area and it will be hard to find either a bank or partner. If it is South or Southeast, it is in the manufacturing corridor and there may be people who will want to work with you, for a long term hold.

However, from your information, the price, as they say in the movies, Is Just Too Damn High.

Congratulations on the 16 units you now own.