Seeking Opinions/ Advise on a Deal

[Dekota Oechsle]

The Details: 

3 Single Family rental homes on one .34 AC lot with existing long term tenants. 

List Price $170,000

1 Br/ 1 BA - Current Rent $450/ Mo

1 Br/ 1 BA - Current Rent $450/ Mo

3 Br/ 2BA - Current Rent $550/ Mo

Homes are in Fair to good condition on the exterior, interior showings not available until under contract during due diligence period.

The Plan (currently)

Try to negotiate to a better but calculate rents based on full price offer. DSCR loan, 20% down ($34,000) at 8.1%. Market rents are $650 for a 1/1 and $1,200 for 3/2 in the area for this size house.

The question(s)? 

1.  We have the $34,000 to cover the 20% down, but would be left with around $8,000 to treat as an emergency fund for ourselves and properties.  We can save $2,000/mo off our W2 income plus the $460/ MO cash flow the property would make IF we get market rents out of the current tenants.  $200/ MO CF is our cut off on any deal.  Rents would be $575, $575, $1000 to get the $200/ MO CF. 

If YOU were in this situation would you pull the trigger on this deal?   I understand everyone's risk tolerance is different and I appreciate any and all feedback.  The concern I have is depleting our savings and being in a vulnerable position for 4-6 months while we save back up. 

Thank you, Dekota

[Jeremy Ellis]

It appears it will be close to break-even even at the current rents.  Are the tenants month-to-month? If not, how long will it take to get up to market value?

 Three properties for $170K sounds like a bargain, especially if you can force appreciation after a turnover.

If the property is breaking even with the initial purchase, I would pull the trigger on this deal with plans to BRRRR (Buy, Rehab, Rent, Refinance, Repeat) the properties as each one turns over to recycle my cash if the numbers work out. This approach aligns with my personal goal to recycle as much cash as possible. However, if your goal is to scale slowly with less leverage, you might take a different approach.

[Dekota Oechsle]

Quote from @Jeremy Ellis:

It appears it will be close to break-even even at the current rents.  Are the tenants month-to-month? If not, how long will it take to get up to market value?

 Three properties for $170K sounds like a bargain, especially if you can force appreciation after a turnover.

If the property is breaking even with the initial purchase, I would pull the trigger on this deal with plans to BRRRR (Buy, Rehab, Rent, Refinance, Repeat) the properties as each one turns over to recycle my cash if the numbers work out. This approach aligns with my personal goal to recycle as much cash as possible. However, if your goal is to scale slowly with less leverage, you might take a different approach.

 Jeremy, 

Thanks for the reply.  The current tenants are on Month to Month basis while the property is on the market.  At current rents the property would lose $315/mo.  However the current rent rates are around 50% of what the market is.  

I haven't been able to see the interiors yet but the plan would be to squeeze a second bedroom in both of the 1/1 units making them a 2/1 and eventually give all three a face lift and hold for long term rentals with the end goal being to sell and roll profits into a bigger/ better deal. 

[Dekota Oechsle]

Update on this.  I submitted an offer friday and received confirmation of receipt.  Since then the offer has expired listing agent has ghosted me with no response.  Funny thing is she is the President of our local Board of REALTORS.  Not sure what to think of that.  

[Jeremy Ellis]

That's a tough situation. If you're really committed to the deal, I would personally reach out 3-4 times a day until you get a response. It's unfortunate, but it shows them that you're serious and not going away.