should we buy 31 unit C class SFR portfolio at 60% ARV in Canton/Akron area?

[Mark Rasmussen]

I have a package deal of 31 houses I’m looking at in Canton/Akron Ohio. Also, the seller won’t sell unless it’s all 31 and he’s not open to creative financing. He’s retiring and wants to offload them.

They are class C properties that average current valuation of 50k to 60K and have an average ARV of about 90k. We would likely make most of them section 8.

We will have to put somewhere around 250 to 300K into rehab for all of them - the majority of that rehab budget is going toward 14 of the properties that are currently vacant. The other 17 need very little work and are currently occupied with tenants. Also, there doesn’t seem to be any big ticket items needed with roofs or foundations on any of them. The seller is actually a huge contractor in the area and he is able to do the rehab for all of the properties if we want.

Once rehabbed, the portfolio should be worth 2.5 million and we should be able to purchase them all in plus rehab for around 1.5 million.

Gross rental income will be about 27K per month after they are stabilized and net rental income would be in the vicinity of 12K net per month after debt service and expenses are paid.

The biggest current question mark I currently have is:

- Is buying class C properties going to be too big of a headache and ultimately bleed us financially? The cash flow looks great but we know that you get what you pay for and we are buying $50-$60,000 houses that are 80 to 100 years old on average which I’m a bit nervous about…