First Rental Purchase- Is 23 Doors too big?

Question

I recently got a call from my grandmother that her neighbor is selling her house. Its a good rental neighborhood so I figured I'd go give it a look. I don't currently have any properties but have been looking to buy my first. I get there and end up finding out this woman has 23 properties all for sale within my local area.

Is this amount of property just way too much for a first time investor to tackle? Most of the homes are brick 3/2 or 2/1 and are currently rented out (3 are vacant)

Nathan Gesner · Answer

When someone says they want to "get out of the rental business because of all the headaches" I start to salivate!She's either a tired Landlord or an accidental Landlord, which means she doesn't know the value of what she has or she doesn't have the ability to bring the value out. This could be an opportunity to snatch up a good deal and really jump-start your investments. However, it's not easy to come up with funds to purchase 23 separate properties and you don't have the knowledge, experience, or time to manage them well. Have you considered partnering with someone that could help you out?

Chris Davidson · Answer

@Nate Truxel if you can get a discount on all 23 since buying a portfolio, maybe offload a few right after if you can with how ever you finance. Like @Joel Case mentioned with a Good PM and other professionals on your side you can knock this down. My question would be is your business going to suffer from this new project, or do you have the time to get this stabilized or through the finish line. If you do take this down and look back in 10 years when you see how life changing this was!You got this!

Nate Truxel · Answer

Scott, Thanks for taking the time to reply! When I visited the home I asked if this was the only property she was selling and she told me she had 23 homes total she wanted to sell because "If we sell the homes we don't have to pay the taxes on them" as she stated. Their father was in the rental business and he recently passed so I think they just want to get out from under them. From the experiences she told me it seems they are more mom & pop investors who treated it as a hobby rather than a business. She told me the last thing I wanted to do was get into real estate because of all the headaches lol. Anyways I agree an apartment would be much easier to deal with. If I did tackle the project I think a partner would be very helpful. I appreciate your opinion

Scott E. · Answer

If it was a 23 door apartment complex, I would say that is doable for a first time investor. The fact that it's 23 single family homes scattered all around your town.... that's a lot. How do you know she even wants to sell all 23 doors? If she is interested in selling the portfolio, you should try to find another buy & hold investor in your area to partner with on this deal. You are going to need help with underwriting the deal, funding the deal, property management, maintenance, etc.

Drew Sygit · Answer

@Nate TruxelDo NOT assume - ask who is managing them right now. Why? Because maybe you can hire them to help you manage them if you buy all of them.Otherwise, email us and we'll partner with you if these are actually a good deal:)

Joaquin Garuz · Answer

Hi Nate,It sounds like a great opportunity, but like many have said you will need a team to manage these properties and make the investment pay off. Given your business background as long as you run the numbers and they make sense the rest you can figure out. I will extend that I would be interested in partnering up or considering some of the units you may not want... I will also share that my brother in law is an investor/property manager in ATL with over 1k doors including some single family, but primarily multi-family. I can make a connection if you would like to discuss some options and consider best course of action. You can work something out where you can even wholesale some of them, if that works best. DM me once you have more details if interested in having a preliminary conversation.Best of luck!

Joel Case · Answer

Nate, if you can secure financing for the deal I think you could pull it off with a GOOD property management company and a few other professionals. Know what you are good at and put the people in place to handle the other stuff.

Nate Truxel · Answer

Matthew thanks for the reply! I own and operate a small business currently so balance sheets and P&Ls are something I am familiar with but it makes sense to have a team when dealing with a portfolio this large. I am waiting to hear back from the owner on appraisal values so I will check them over and go from there.

Matthew Irish-Jones · Answer

@Nate Truxel yes this is too much for a first time investor unless... you have assembled a team of professionals. If you have an investor focused agent who can help with analysis, a property manager who can assess rental rates, and project a budget, and a lender on board who can underwrite it, then you can make it work. If you have a general understanding of business, how to read a balance sheet, and how to read a P+L, you should be fine. If all of this is new to you, that's a lot to take on.