Help with Offer -- Multi Property Deal Part 2

I would like the input from you experienced investors on this situation.

I would like to purchase 4 more investment properties. We currently own 14 units–9 single family homes, a 3 unit commercial building, and a duplex.

The homes I am now looking at purchasing need no repairs and are currently occupied. Two of the furnaces are old and the appliances are old in one of the homes. Appliances are generally included in our rental market.

The seller has several houses and wants to move to Florida and wants to get out of rentals. I’ve looked at most of his properties and these are the ones that I think will work for us.

I am considering making 2 offers–a buy on contract offer, and a buy using conventional funding offer. The seller said he’d be open to selling them on contract.

I’m including the total costs for the 4 units (one is a duplex with one bedrooms each side).

Owner is asking a total of $120,500 for the four properties.
Current rent $1,925/month (rent is low for the market and needs to be increased over time)

Total Monthly taxes: $230
Total Monthly Insurance est: $175

I’m not sure how to structure the offer if I buy on contract (the seller said he’d sell on contract with a 2-3 year balloon payment. Could use some advice here…thinking of offering $113,000 with 5k down at 6% for 3 years.
My payment would be $647.51/month

The other offer would be with bank financing. I’m not sure how low to go here. The guy is no dummy so I’m not going to steal them but the numbers have to work for me. He’s a realtor and his family has invested in rental properties for a long time.

Looking for advice on how to structure this so it works for both of us. Would appreciate your help with this.


Meeting with seller Saturday. Looking for some help with this offer…Would you do this deal?

I got your email. It’s been a busy couple days so I’m just now able to get on here and post. If this seller is willing to carry it at 6%, that’s better than most sellers. I know people who want to get 10% when owner financing. 6% is about what we’re getting from the banks right now on our commercial loans.

I would want the package down closer to 100k with the rent being $1925/mo. You said there’s upside there, but you’ll probably either have to step it up over time with the current tenants or you’ll just have to set it where it needs to be and deal with people possibly moving out.

I tried to break it down looking at it like this… Would I buy four different houses for 30k each that put out $480/mo rent? Probably not with those numbers. I would rather pay 25k per unit for that rent.

Since we do almost everything on 10 yr amortizations, the payments would be $1,337.80 on $120,500 at 6% for 10 yrs. That’s way too slim considering taxes/insurance too.

You’re probably not going to be able to get the seller way down on the price and get favorable terms on owner financing. If you have the money to put down, I’d probably go the bank route and see if they’d fix the rate for 5 yrs. I still think you need to get the price pretty much at 100k, but on a 10 yr am it’s still going to be tight. I guess it would help to know how much you think you could get the rent up from where it is now.

Thanks for your feedback, Justin! I just met with my banker and he said he’d loan me 90K @ 5.5% ammoratized over 15 years. I’d need to put 10K down. My payment would be $735/month. Monthly rent is $1925.

Would you do this deal?

I would do the deal at 100k like I said. With the properties in good shape and some upside to the rent amount, I think that sounds good.