Opportunity Knocks Or Does Failure Knock

[Shane Craig]

In the past I would only buy rentals that had great cash flow. In my area it's relatively easy to get single family homes close to the 2% rule and apartments at the 1% rule( C class properties).  I have many homes and apartments that meet this criteria however I have been given the opportunity to buy a large portfolio of 38 Apartments ( two buildings both are B - A-class ) through owner financing ( $2,500,000, $200K down, 5% interest, and 20 year loan). To be honest I doubt a bank would let me borrow that much money or they would want more money down.  Both of buildings are fully occupied and they are in very good condition however this deal offers low cash flow and is at the 1% rule with little wiggle room.  This purchase would be a long term investment and I would be focusing on leverage and debt pay down not cash flow per say.

I'm 34 and have 30 doors right now that do cash flow. I feel like this a unique opportunity or maybe I'm crazy.

Tell me what you think. 

[Jim Pellerin]

@Shane Craig Debt is good. That's how you grow. Make sure you underwrite the property thoroughly. What is the NOI/Cap rate and what is the cash on cash return? Look at their expenses to make sure they included all the typical expenses like management, maintenance, and vacancy. Check for any major capital expenditures and see what was done in the last 5 years and what might be required soon. Just because the terms are good it doesn't necessarily mean it's a good deal.