Packaged Deal: 6 Properties and 4 Notes

[Drew Castleberry]

I deal just fell into my lap over the weekend. A family friend that has his on REI business (175+ properties) wants to start liquidating his properties and is giving me first dibs. He wants to sell of pieces of his portfolio over a couple years and I'm hoping to establish a relationship to be able to eventually buy his entire portfolio from him. Here's the initial deal:

6 rental properties - market value $300k, purchase price $210k. All properties already rehabed and have long term tenants. Total monthly income after expenses and reserves is about $450, or $75 a door.

4 performing notes - remaining balance $$185k, purchase price $129k. Notes are at 9%, 10% and 2 at 12% with remaining payments of 45, 275, 219, 239. Total monthly income of $1400 after debt service.

Since I can't pay cash and have to finance, the 6 properties by themselves aren't that great of a deal. But the notes themselves make up for the properties performance until I can pay off the mortgage to increase the cash flow.

Essentially, he is giving me a 30% discount off of market value. I wouldn't buy the properties except that it's all or nothing, and if I want to purchase more from him in the future I need to buy them all now to establish the relationship.

Here's what I need help with. How can I get financing for a packaged deal like this? I'm waiting to hear back from my lender if they can do a commercial loan but don't know if they will or not. If I can't package them together, I'll finance them separately. How can I finance note purchases? I haven't been able to find anything here on BP and all my google searches came up with note financing with a minimum of $1M or more.

I'd like to buy and hold the notes, but one scenario I might be open to is selling the notes after a year or so since they are peforming and if I can get a good enough deal out of them, use those funds to pay down/refinance the mortgage on the properties to increase the cash flow and/or purchase more properties from him.

Any and all help is greatly appreciated! Right now I'm hitting a mental road block on how I can make this work.