Called about a duplex, got offered a portfolio...

[Arron Robertson]

Hello all,

I am brand new to real estate investing looking to invest in value add multi family properties and I stumbled upon a deal that has a lot of potential. 

Let me start from the beginning.. After reading Rich Dad Poor dad I started listening to Bigger Pockets about 10 months ago and I've been trying to read and absorb as much as I can. I've narrowed down what types of properties I would like to invest in (as mentioned above) but I haven't had much success finding deals using typical avenues like: the MLS, Zillow, Craigslist, Loopnet, Etc.

Theres this duplex a couple blocks from my condo that's had a "for rent" sign up for about a year, so I decided to call the number on there to see if the owner would be interested in selling (since it seemed like he wasn't getting any tenants even though we live in a really good area). Also, it wasn't listed anywhere online for rent that I could find, so I figured this guy just didn't care. 

Fast forward to the "deal".. I ran some numbers on the duplex and had a price in mind so I called the owner. When I asked him if he was interested in selling he said "make an offer" which got me really excited, but then he followed up with "make me an offer on everything". "Everything" is 6 total houses (4 of them being duplexes). I told him I'd have to run some numbers before I could make and offer. I talked to my uncle (who's a Realestate agent) and asked his advice. He told me to try to get current rent rates, leases, etc from the owner, but when I called him back, he changed his tone and basically told me not to waste his time. 

So heres where I could use some advice. We would like to make an offer of somewhere around $850,000 for the whole lot, plus $60,000 in repairs.

How can someone with no real estate experience get a loan for almost $900,000? I have family and friends that have enough money to possibly take care of the down payment, but I wouldn't know how to structure the deal? 

I know this is a lot for my first deal, but I feel like I have to at least try to see where this can lead.

Any advice or guidance would be appreciated!

[Jim K.]

@Arron Robertson

All right, Arron, I'm going to give you my only slightly varnished version of this: this dude's messng with ya. Ain't no one gonna slap a million bucks in real estate financing together, hey presto! without getting a commercial property loan. In order to get a commercial property loan, you, at the very least, are going to have to have extensive rental records of these places. What this dude is hoping for is a pie in the sky cashout in a hot economy, a green rich kid with WAY too much money at the peak of the market to call him, and maybe put up family money or mortgage daddy's business to buy the owner's portfolio of rotting lemons. Maybe the dude's just ready for the funny farm and you caught him after he took his meds and before he hit the hay for an afternoon snooze in the sweet arms of whatever smack he's on.

Seriously, you just asked the owner how much rent the portfolio takes in and he played big-man-don't-waste-my-time on you? That's not doing business, that's spreading it thick and heavy.

I have no idea how you, without a single deal under your belt, are looking at four duplexes and two SFRs sans inspection and coming up with a $60,000 repair figure that you are willing to risk almost a million bucks on. So we have two parties here that are not being wholly rational -- you due to inexperience, he due to opportunism.

Follow up. This is a business lead. But do not think of this as the supreme sweet deal of a lifetime to be solved if you somehow put together the 900K in financing. Could it happen? Of course. And monkeys could fly out of my butt, too, but somehow I doubt they will.

Figure out how to buy a portfolio, get the information you need, and then come up with your offer. DO NOTHING WITHOUT REAL NUMBERS TO NAIL DOWN A REAL OFFER.