WOULD YOU DO THIS DEAL

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Buying 60 single family homes for 2 million with a combined appraisal of all properties adding up to 4.5 million. seller is showing an NOI of 290k. Found a bank that will lend 2.3 million with no money down giving buyer 300k for repairs or whatever. the interest rate is 11% with the bank offering to refi in one year at 5.5% buyer has to pay closing costs including 4 points to the bank. properties are 90 % occupied. Interest rate is high but buyer only has to pay closing costs to get houses. Is this deal worth doing. Also the 11% loan is interest only.

I'd do it, not on those terms though. Although it's real early in the morning and I haven't had my coffee, it looks like with that debt load you're going to be treading water. What happens if there's no re-fi in a year? Bankers have been known to lie!

My biggest concern is that you're buying a MANAGEMENT HEADACHE. "Appraisal" averages $75K! That's lower end in any market, ghetto in a lot of them. Hence the 10% vacancy. Even in my part of TX (cheap houses) that's the bottom 5% of the market. And you're buying them for less than 1/2 of FMV. How much work do they need.

I once did a 11 house deal for about 60% of FMV but I had a VERY QUICK EXIT PLAN for 4 of them. And even at that it took over a year to get my life back to "normal".

cash

First, I certainly wouldn't believe the seller's numbers, especially the NOI. What are the gross rents? How long have the tenants been in the units? I'd definitely want to look at the leases and do a criminal background/eviction check on the tenants. I also do not believe that the bank will refi in a year at 5.5%. Why is this guy selling?

Mike

I am with Mike. I would do it if everything checks out but I would be very skeptical. Do your due dillegence.

I am most skeptical of the bank doing the deal with no money down.

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