18 Property package - Opinions on value

[Lewis C.]

Hello - I am looking for some feedback and suggestions on the value of an 18 property package in Memphis. The properties are located in good areas - U of M (inside the highland / Park / Goodlett boundary), Midtown (Vollintine-Evergreen, Cooper Young), Colonial Acres. The package comprises of 12 x SFR, 5 x Duplex, 1x 5 unit multifamily. Most of the properties are 60+ years old.

Total rents are Approx $24,000 / month. Some have new roofs and all have been rehabbed to a good standard. All but 1 are currently occupied. The package is being professionally managed. 

As fellow investors - What value would you put on this package?

Thanks in advance for the feedback!

[Allen Fletcher]

@Lewis C.

You need to go see each property and make a list of needed renovations for each property. Be as specific as possible. Get on your assessor's website and check taxes for each individual property. Call a few insurers and get a few quotes on insuring all the properties. Once you have all of these numbers listed out for each individual property sit down and run the numbers making assumptions on maintenance, cap ex, management, vacancy, etc. Use all your data and assumptions to figure out net income. Does that number meet your desired goals? Assuming the 1% rule, are you willing/able to pay 20% down and carry 80% loan with that level of income? If the answer is yes I would then prepare an offer on the properties that looks like this (Gross rent/1% - Rehab costs - closing costs - x%) where x is twice the maximum discount you want to make the deal as profitable as you can and still be seen as serious. You will be asking for a low price, but if the seller wants to sell he will counter and hopefully you will settle on a price where the final discount is x/2%.

Does that make sense?

Allen Fletcher