Is it good or bad that an investor is liquidating his portfolio?

Question

I'm considering starting as a buy and hold investor in my home county of Berrien County, MI. But I saw today that an investor in Berrien County is selling his 20-unit rental portfolio. Here's the Zillow listing:

https://www.zillow.com/homedet...

Is it a bad sign that an investor is dumping his Berrien County portfolio? Or is this actually a tremendous opportunity to buy rentals that are already established? As a newbie investor, what do I need to know when another investor puts a bunch of assets up for sale?

Caleb Brown · Answer

Ask the agent. It could be he's selling to liquidate, going into larger deals, or tired of owning homes.

Scott M. · Answer

Neither good nor bad.  You can ask the agent but the odds of getting the actual answer if it is for a bad reason are next to none.  Only way you know is to do your due diligence.

Honestly, treat it like any other deal and try not to read into things and make things up.  Might need cash, might be retiring, might be a junk portfolio and he is looking for a sucker.  You just never know.  do proper due diligence and you will be fine.

Joe Villeneuve · Answer

I buy from REI liquidating all the time.  Potentially a perfect scenario for seller financing.  Translation:  Buying properties for almost nothing while maximizing cash flow now and profit within about 5 years or so.

Aaron F. · Answer

I know some local investors listing their places high just to see if they sell. The market has been hot so why not try? They’re betting on some sort of 08 correction where they’ll be able to buy twice as much property for their money. I’ve thought about it but decided to hold on and keep buying instead.

Steve Vaughan · Answer

What a horrible listing.  Details on other 19 properties available upon request.

The guy should've sold by owner.

Sam Slivinski · Answer

Justin,

I would say its a huge potential opportunity. The investor could older and looking to cash out or someone that just doesn't want to deal with the day to day of real estate investing. I would learn everything you can about the investor and if possible speak with them.

How well do you know the rental areas? The investor could also be pulling out because of some macro trends they see in the area and they think the market there is heading down. Something to keep in mind as well is that the entire real estate market is high right now, at least where I am multis are selling for 25%+ what they were just a year and a half ago. Some people think there is going to be a crash and in this case they could be trying to cash out on the high prices before the dip.

Hopefully this helps, if you can get in contact with the investor I think that is your next best step!

Account Closed · Answer

Generally, when someone sells a portfolio they should discount the properties, heavily.

Tanner Sherman · Answer

@Justin Megna people liquidate for many different reasons. Maybe he reached the level of equity that he would need to happily retire, wants to find a more passive investment, etc. You can always ask the listing agent but they do not have to tell you why the selling is selling. I would be cautious but go into it with an open mind.

Melissa Wesling · Answer

I don't think it's a bad sign for the area that this portfolio is being sold. Like others mentioned, the seller may be ready to retire or turn the money into a different investment.  I invest north of here and the market is booming. I have recently come across a few portfolios for sale where the seller's goal to sell the portfolio at a higher price point because they are also selling their "business" along with it.  In some cases, this is fair.  However, since we don't have information on the other 19 properties in this listing, it is hard to say with this one.  The listing only specifies that the pictured property has quality long-term tenants and of course no information about the history of the other properties. I would inquire about the rental history for all of the properties and also try to find out the estimated price for each individual property to see how it compares to the list price.  I am interested to know if there is an added amount to the price tag for the business sale. Due your due diligence to determine if these are established rentals and if they've been cash flowing or can potentially cash flow. Are you wanting to do LTR or STR? There is a very limited area in St. Joe that allows STR, so you may want to use LTR numbers for your proforma.

Nathan Waters · Answer

I'm familiar with the area.  We have over 30 rentals in that neighborhood. We are also considering liquidating to move into other investments.  Not waiting for an 08 type correction but looking to sell a turn key operation and start again acquiring value add opportunities.

Is it good or bad that an investor is liquidating his portfolio?

Most Popular Reply