Disadvantage in acquiring too many properties

[K. Mitchell]

I found this interesting, and thought I would share.

I invest out of state in a mid-sized college town. There is a distressed seller in the market I invest in. She has just shy of 200 rental properties in my market (and another 200 in another market) and she is wanting to sell all of them.... I was able to get her detailed rent roll for the houses in my market.

Here are some info from her rent roll:

* In a town that has a 3% to 5% vacancy rate, she has a 33% vacancy rate.

* For comparable properties (some of which are literally across the street from mine), she is renting them for about $100 to $200 per month less than market.

* With just over $10 million in property values, she is pocketing about $11K per month cash flow. That is about $60 per month per property, in a town where properties usually cash flow about $200 to $400 per property.

She uses a PM in the other rental market to manage the properties in this market. Having worked in this market for 10 years and knowing just about everyone, I have never even seen a listing for the PM or heard his name mentioned.

Apparently the seller and PM just can't keep up with the properties. In talking with the agent, she make it clear that the seller doesn't even really know what properties she has.

I can't help wondering if this is what it is like owning a few hundred rental properties? If so, I wonder if this means the smaller investor has this much of an advantage over the larger investor?

[Mike H.]

Have you ever wanted to start your own property management firm? Or if you already have, might you want to consider offering her a service to fix her problem?

Tell her you can fix her problem and you can get the units pulling in a lot more cash if she turns the management over to you.

Go one by one, take care of the deferred maintenance (which I'm sure is why they have such a high vacancy rate), get the vacant ones rented at the market rate and start raising the rents on the others as the leases come due (after updates are made).

You might be able to lock in a really good stream of income and then turn the well-oiled machine of managing them over to a couple of employees (that work for and are trained by you).

They're going to be competition anyway. Why not figure out a way to make some money for yourself given how much of an opportunity there is to improve her bottom line.