Owner Selling Portfolio

[Robert Hamilton]

So tonight I was going through Realtor.com and checking out multi-families and come across a listing in which the owner wants to sell two of his properties as a package. While reading the description, it states that the owner would like to sell them as a package if possible; that he/she is selling his/her portfolio. For whatever reason, I check out the tax assessors website on this particular address and find that this owner has at least 50-60 properties. I did count them all. I'm thinking if the owner is selling off the portfolio, this could be lucrative. So, being that I am a newbie, I don't want to sound like a total dunce when I call the broker. Any advice?

[Marcus Auerbach]

@Robert Hamilton Great question! It could be a good opportunity: protfolios of small properties are not that easy to sell (or buy). Generally that asset class appeals to newer investors, but they usually are lacking the funds for such a big bite. Mature investors with deep pockets know that due dilligence on a portfolio is a crazy amount of work and will usually prefer an appartment building of similar size.

If you want to take a stab at it, there are two things you should have in place: #1 Funding. Either a Pre-Approval Letter from a commercial lender or Proof of Funds if you are buying cash. You need #1 also to get #2: an experienced Buyer's Agent. The agent representing you will usually be paid by the seller, but their feduciary duties are with the buyer, not the seller. You want someone who is an investor and understands what makes a good deal, understands rehab cost and construction issues and is local (which will probably disqualify me).

Your agent will then contact the listing broker, so your experience level will not be obvious to the seller and quite frankly you should remain in the shadows as much as possible. The less they know about you the better.

A sophisticated seller will ask you to sign an NDA (non disclosure agreement) before they will provide you with the details about the portfolio. At a minimum you want to see a list of adresses, rent roll and property management records to understand the basic condition of the package like occupancy rate, late payments and maintenance records. Interior pictures are great. If that looks good at that level, you will negotiate a price and get the package under contract. This will start your due dilligance period. This is the part where you need additional ressources, it takes a while to inspect 60 properties and review the results of each one and then understand if and how you have to get back on the negotiation table before moving forward.

Hope this helps a bit, feel free to reach out if you have further questions!