Tired Landlord... Acquiring the Rental Portfolio

[Luke Petrozza]

Hi All, 

I am looking for some advice on what due diligence I need to perform in the following situation.  

I met an older investor that has 47 properties that he's acquired over his career. He's looking to liquidate and move to the beach with his wife, but has said he is open to terms as far as seller financing. 

There are 31 SFH , duplex, and mobile homes, and the rest are vacant lots. We signed an agreement to purchase for a price of 950k. Income from his last year showed approx $15,000 per month after taxes and expenses (he owns these free and clear).

What type of information would you request for a situation like this. I haven't dealt much with rentals, but my long term goal was to acquire cashflowing rental properties

Any advice would be greatly appreciated!

Regards,

Luke

[Mike Sedlacek]

You need to see his IRS tax return on these properties to verify the profit and loss. Need to check with tax assessors office for property taxes, tax rate and payment schedule and if there are any delinquent taxes to be paid. You need to see the insurance policies, are they up to date, can  you renew with thier company on same terms or will the premiums go up when you purchase. Or do you have to get your own from your own company. Check with utility companies to get actual costs, are they up to date and are they on a budget plan. Are there any flood concerns? If so do they have flood insurance and will the premiums go up with a new owner? Also need to have the rent rolls and verified monthly rents, who is paying, to whom do they pay, date of last payments, are there any arrears for rent payments and are there any current litigation's going on at present for nonpayments. Need to have your attorney or title company do title search on all these properties of course for proper title transfers on all properties and lien search to determine if there are any current liens on the property. 

Have you viewed each unit to determine repairs and Cap. EX. for near future? Have you looked into a professional management company for rates and terms? Or do they have one employed, and if so what are thier terms and can you continue with them?

Have you looked into rental rates for the area, are his low, is there room for increases as soon as you take over? 

And most important is what will it cost you at your first day of ownership and are you prepared for this? Will you have to do evictions that day? Who will be collecting the first months rents? Do you have bank accounts set up starting on your first day, rent deposits, security deposits, maintenance budget, utility payments, etc...