Rental Portfolio Due Diligence

[Ruthie Johnson]

I was presented with an opportunity to buy 6 single family rentals (all in the same location, but out of state for me) as a portfolio. Each had been purchased and renovated to rental quality by the same owner 5 years ago. They were offering it as a turn-key deal with property management and current tenants established. The deal seemed fair, I would net over $1,000 monthly, but the price seemed high for the properties. I contacted a local agent to verify the individual estimated value of the homes. Combined, it was 30% less than the asking price (asking price $325k, estimated value, including updates made, ~$200k). Seller wouldn't budge on price. Agent mentioned I would have to sell these as a portfolio in the future, or invest considerably to bring each property up to standards for individual sale.

Any insight into how to do due diligence on a portfolio?

[Lynnette E.]

Why not buy 6 individual houses you like, that are at salable standards and save 30%?

Just because the current owner collected 6 properties and wants to sell them as a set, does not make them worth more.  IF I bought a bunch of properties from one seller, I would want a discount.

Pass on that deal, its not a good one.

Eventually you will need to do repairs if the houses are at 'rental' standards: sounds like you would be a slum lord.

Plus the net rent you get for $325k is 3.6% a year.  Way better investments that can make that.