Analyzing a Package Deal

[Tom Moran]

Greetings everyone,

I'm reviewing a package deal right now involving 6 properties – 14 units. Most of the properties are in the same neighborhood (D-Class), there is the option to extend the deal to 10 properties – 22 units. After pulling the real estate assessor data it really is a mixed bag. High and low valuations but very good purchase prices (back in 2008-2010) by this current owner. 4X duplex, and a 6-unit.

All of the homes are currently being rented (ranging 550 to 750) totaling 7900/month Gross. My best guess is that Net monthly would = 30% accounting for all expenses. After driving the neighborhood not all are in the best of shape.

What steps would you take to evaluate this mixed portfolio deal? Do you do a cash flow analysis on each property or the entire package? There are no recent comps for some of these and in obtaining a loan how is the value/appraisal determined. The owner says he doesn't want to sell homes individually and cherry picking individual deals would dilute his benefit. Owner has experience and wants to sell and move to commercial property from these mixed Multifamily properties (his motivation). I want to scale up but trying to avoid a package which includes his non-performing deals??

Any thoughts would be greatly appreciated..