Land Lord Looking To Move To Commercial
I came across an ad the newspaper for 20 units for sale. I got a call back today, the owner is looking to get into commercial property and is selling 20 rental units. HUD SECTION 8, homes, all ranging from high 40k to low50 k, appraised at high 60k to low 70 k. Most are currently rented out. The 2bdrm units rent for 525-550, and the 3 bdrm units rent for 625 to 650.
The owner is willing to take a 2nd note for down payment. I'm pretty interested, but I don't want to just jump in, because I could end up with negative cash flow, if I can't find financing to make the deal work in my favor.
Just wanted to ask experienced land lords how I can come out on top in this deal. Should I only buy one, and see how it goes? Or should I try to negotiate the prices or even buy a few of them...maybe get a discount.
I was trying to figuring a few different fincaning options that I thought of, but each way I tried it, I was cutting it too close.
Is this deal do-able? How? Your suggestions are appreciated.
JB
1. Run the numbers
2. Figure out how to finance
3. Figure out what you'll do with it once you've got it.
You haven't told us much, but the numbers seem decent. If you can jump into a good deal right now and have 20 units then good for you. Approach it unemotionally. Look at each and every unit. I'm not sure what the mix is. If they're all 4 units or less per parcel then financing should be a cinch. If any are 5+ then make sure he carries 25% or more.
see if the seller will get even more creative and sell the properties on a real estate contract. make sure rents exceed payments, insurance, and taxes. if all this works it should be a winner.
[ Edited by RKIMBELL on Date 03/02/2004 ]
Buying 20 properties at one time is a dream come true for most people. I would be overwhelmed. But if I bought twenty I would get a blanket mortgage on them. I would make sure I could sell them individually. This would allow one closing and transfer. The cost of 20 appraisals would be the biggest expense.
Lori
[addsig]
I would be surprised if you could get a lender to go with this as you lack experience as a professional landlord. You might be able to do seperate loans on each with different lenders.
How big of a second will the seller carry? If the first has a low LTV you will have an easier time.
Consider taking on a partner that has some cash and a track record.
Send me an email for other ideas.
John
Tinman - That's an interesting idea you have about having only one closing, but I have a question about that. I've closed on more than one deal at a time, and because there was more than one property (same owner), the real estate companies involve wanted to charge their junk fees for each one. The company my realtor works for was willing to charge the fee only once, but the other insisted on the multiple ridiculous fees. I wasn't going to blow the deal for a few hundred bucks, but I certainly wasn't happy about it. What has been your experience with this??? Zach