Need Advice - Off Market Opportunity

[Jason Burnside]

Hello all!

I have a situation that I am trying to determine the best path forward. I have an opportunity to acquire a handful of properties off-market with minimal investment and I am worried about the overall risk associated with the properties. Below is a summary of the situation/opportunity.

Property Owner: He is a family friend that owns 25-30 properties throughout SC. Properties range from $60k - $250k. Knowing the owner, he has deferred maintenance on majority of his properties for 10+ years and the properties will most likely need substantial work. All the properties are rented with rents ranging from $400 - $1500. The owner is getting older and would like to sell the properties and provide owner financing. He is very particular and isn’t particularly easy to work with.

Opportunity: He is willing to sell a few of these properties. I have a HELOC with nearly $250k that I can deploy.

Property A:

2 Bedroom/ 2 Bath 1300 sqft

CMA $130k & current rent of $1000

Offer $10k down, $105k owner-financed 20yr @ 8%.

Property B:

3 Bedroom/ 2 Bath 1100 sqft

CMA $120k & current rent of $900

Offer $10k down, $105k owner-financed 20yr @ 8%.

Property C (Duplex):

1 Bedroom/ 1 Bath & 2 Bedroom / 1 Bath 1350 sqft

CMA $123k & current rent of $1200

Offer $10k down, $95k owner-financed 20yr @ 8%.

Property D:

1Bedroom/ 1 Bath 525 sqft

CMA $80k & current rent of $400

Offer $10k down, $40k owner-financed 20yr @ 8%.

I originally considered purchasing the 4 properties using $40k from the Heloc. The existing owner does not have a clause in the agreement restricting me from selling any of the properties. With that being said, I was considering selling Property D and paying off the existing Heloc. My concerns are that the margins are tight and positive cash-flow will be a challenge with the owner-financed debt vs. rents. Though there is opportunity to increase rents as these are significantly below market value per BiggerPockets rental analysis tools. I really hope we can make this work as there may be future opportunities with this property owner.

Any thoughts or considerations would be much appreciated.

Thanks!