12 Property Transaction

[Jeffrey Miller]

Investor Profile: Investor in Baltimore’s low income row homes. These home are traditional brick, 2-3 bed, 1 bath, 900-1000 sqft, built between 1950-1970, and rent between $900-$1100 / month. I focus on neighborhoods on the outskirts of the city that are less dangerous and strive for the 2% rule.

Financial Profile:

• Software engineer day job
• Near 800 credit
• Primary residence
  • $230k loan, $60k equity
  • $1600 month mortgage
  • $1200 month roommate income
• Single investment property
  • $950 month rental income
  • $250 month cash flow after mortgage and management fees
  • $30k loan, $60k equity
• $100k Retirement account
• $30k personal cash

Deal:

• Investor seller (moving out of area)
• 12 homes fitting my profile in single neighborhood
• 100% occupancy, 75% section 8
• each rent $1000-$1100 a month
• asking $60k each, neighborhood retail is $40k-$70k depending on condition
• Seller is introducing me to his portfolio lender
• Seller is offering second lean to help qualify the loan

Concerns: I will be meeting with the seller and his lender on Monday. This meeting is to make sure I can qualify for a loan before proceeding to inspect the properties. Assuming that these homes have been maintained, I see many pros and cons to this deal and would love to receive advice / opinions from some more seasoned investors.

For me the financing would need to be enough to cover both loans, pay a manager, and still cashflow enough to build a vacancy/maintenance reserve. It would also require for me to not put down all of my cash and instead leverage equity.

Pros:

• Turnkey properties, less risk in the beginning
• Familiar lender and opportunity for creative financing
• Large transaction - quickly and significantly increase my portfolio size

Cons:

• Jumping from one investment property to 12 may be too risky
• No forced equity