Purchasing occupied rental from another investor

[Anne S.]

Good morning BP community!

I have been studying REI for about a year now and am ready to move from analysis paralysis to making my first deal happen in 2013. I attended my second local REIA meeting last night and was approached by a more experienced investor who indicated that she owns a house I might be interested in.

I searched the house online for some basic information, but was wondering if anyone could give me some suggestions of what financial specifics I should request from her in order to determine if the property is worth looking into further. The cautious side of me questions why someone would sell a so-called "cash cow" to another investor. Transitioning her portfolio?? She owns several large apartment complexes and approximately 30 SFH.

Any insight is much appreciated.

Cheers!

[James Vermillion]

Hey Anne,

Why did she believe you would be interested in her property? Had you previously mentioned your investment criteria or what you might be looking for in an investment property? I ask this just to make sure someone did not identify you as a new investor and target you to get rid of a property they are trying to unload.

The first question I would have asked in this situation is why she is selling it. It could be that she rehabs properties, puts tenants in place, and sells "turnkey" rentals to other investors, or as you said, perhaps she is adjusting her portfolio and trading up.

There is a lot you will need to know about the property to determine if it is a good deal for you or not though to include:

- rent history
- vacancy rate
- current lease terms
- expenses (operating expenses, insurance, taxes, etc)
- market value of the property
- property condition

Once you know more you can apply the 50% rule to determine what the long term expenses will be.