First Deal (1-11 units)

[Paul Wakim]

Hello! So, I have been reading up on some buy and hold acquisition strategies but I would like to know what others in the community have to say about analyzing my first deal. 

So I have the potential to purchase 1 - 11 units in a local investor's portfolio. None of them are on the market, and he is ready to get out of the game after 30+ years of ownership. Most of the properties (at least 7) are in great up and coming areas here in Pittsburgh. There are 2 4plexes, one duplex, and 1 single family home. I am most interested in one of the 4plexes which is a few houses down from where I live now. 

The current owner purchased this 4 plex in 1993 and paid $85,000. 1 unit is vacant, 1 unit has an older woman living in it that is paying 1/4 the market rents, another is rented by a family that has been there for 20+ years and the 4th I don't have info on. From what I gather from short phone conversations with the existing landlord, he most likely has done a poor job "training" the tenants to pay on time and take the best care of their units. 

With minor aesthetic updates, I know each unit could rent for $1000- $I200 per month (*without seeing the units yet*). I am friends with another investor in the area who owns properties on the same street, he showed me around his units and told me that he gets $1000-1200 per unit per month.  I have not had the chance to send a contractor into the units but I definitely plan to put at least $30,000 into updating all of them over time, the roof and chimneys will need to be replaced or repaired for sure and none of the units have AC. 

As for my financials, I have a private money lender who is a recommendation from the other investor who showed me their units. They have done business together for 18 years and he has offered to make the introduction. The lender will need 20% of the purchase price as a down payment and will fund 100% of any repairs or updates. All the loans will be done at a 10% interest rate. I plan to pay him back when the property is updated, fully rented and refinanced (<6months).

My plan was to put the down payment in, do some minor repairs and aesthetic updates to the empty unit, get it rented, try to get the older lady out of her unit (cash for keys) and see if I can do the same with the other existing tenants. Whether I can get the long term tenants out or not (maybe I won't have to) and get the rents up to market value, and once the entire building is rented I would then go to a traditional lender to get a conventional mortgage. 

Can anyone give me any advice on getting an older long term tenant out of a unit so that rents can be raised to market rates? 

I completely understand the saying that you make all your money when you purchase the property so I am worried that if I pay too much now I will not be able to be cash flow positive even after the refinance with the conventional mortgage. I am also worried about purchasing at the right price to be able to cover the loan the private money lender will be giving me when I refinance. How should I go about coming up with an offer price for this property? 

I would appreciate any and all advice greatly. Please let me know if you need more information. Thank you!