six single family homes for 200K. Owner Finance. Getting in deep.

[David Oxandale]

Getting back into realestate investing. I have a co-worker that is looking to retire. He owns 6 rentals that need about 5k to get rent ready. I work full time and the houses are 2.5-3 hrs away so will be looking for property management. Here are the specs:

1. Purchase 200K

2. 0 down, 5%rate, 30yrs

3. 5k rehab for rent ready

4. Total estimated rent $3800

5. Management (10%) = 380

6. Capx (200per) = 1200

7. Taxes & Insurance = $7500/yr

I plugged this into the rental calculator using standard percentages on the other items and showed I could net 800-900ish per month. Cash on cash return 200%+. That does not make sense. What do you think?

[Jeff Filali]

If you decide not to buy them or are looking for a partner on the deal,  send me the details.  I'd be interested in more details for sure.

Additional Questions you need to look into:

1. What are they actually worth? What's the ARV on each house? Just because they're offering to finance with zero down, doesn't make it a good deal if you're paying more then ARV. A lot of times we get caught up in someone offering the financing and ignore the numbers.

2. You should have your own contractor go bid the work.  Just because they say $5,000 doesn't mean it really would be.  I've learned to never trust someone else's estimated repair numbers if they're trying to sell me their property.  Plus, some people would do repairs different than others, Band-Aids versus surgery mentality.

3. Are any of the properties currently occupied?  If not, why not?

4. Do they own others and just trying to get rid of these for some other reason such as bad area, difficult to get good tenants, etc.

5. Make sure there's no penalty for early payoff, there's no way I'd ever finance them 30 years unless I could pay off earlier without being charged for 30 years interest.

6. I'd be asking what their bottom dollar cash price would be?  You may find that you could negotiate a better deal by getting your own financing, even if you had to come up with down payment.