I need differ perspectives on structuring this deal

[Eric Myers]

I have come across a deal with an investor that is looking to retire. He has a portfolio of about 15 bldgs from sfr's to 6 unit bldgs all in the same neighborhood, for a total of 35 rental units.They are not in the best but not the worst part of town but claims to have a low vacancy rate there. I do own other proprties in the town so i am familiar with the area.

The seller is very flexible with this deal, I can buy it in whole in part or just one if I choose. The only thing he wont do is name a price for the package or a property. Nor will he discuss terms, but will consider holding paper on these, all but one is paid off. I have to present something to him. I went to the county record building and found out the "fair" market values, and what he paid for each propert, the lowest priced one was 17K high was 100K mean is 30K.

Ideally I would like to buy the entire package, but when I review the numbers, doing a cash flow analysis sheet on them, it may be more profitable to just buy the multi-units. But I could take them all and sell of the SFR's down the road and cash in that way.

What I know is the rent rolls, the taxes, the insurances, the maint man cost (but not material costs), the lawn care costs. All of the utilities are seperated out, right down to the water and sewer. The only costs here are your PITI payments, and the maintenance. For the price of the bldgs and int rate I am guestimating them.

I have it all mapped out and can elaborate more as needed just dont want to write an essay on it just yet.

[Jon Holdman]

You say you already have other units, so you know this is not the end of the costs. Vacancies, evictions, utilities for empty units and common areas, common area maintenance, legal and accounting fees, etc.

Still, seems like you know the area and have someone who's at least somewhat motivated to sell.

I'd back into prices using the 50% rule. Assume expense (including capital items and vacancies) are 50% of gross scheduled rents. Use some reasonable interest rate and whatever you want for desired cash flow and compute your price.

Offer him a few options. One with a higher price where he carries the entire deal. Another where you give him some up front cash in exchange for a lower price. A third where you finance the deal at a still lower price.