Turn Key VOA Property - Too Good To Be True?

Question

So I'm brand new to investing. I paid for the annual subscription to BP and have been analyzing deals like crazy.

Found someone that is a wholesaler for a fix and flip investor.

They have rehabbed a property and filled it with veteran tenants.

The numbers almost seem too good to be true. I spoke with the wholesaler and checked her reviews. All seems on the up and up.

Sounds like I would have to get hard money loan for 24 months, then cash out refi to conventional.

Again, almost seems too good to be true, but maybe this is how you find opportunities.

Email from wholesaler on the deal:

These 2 properties are the 5th or 6th of the same business model/investor I've sold now. Basically this investor takes ran down properties, rehabs them, puts vets into them and then gives them to me to sell as cash flowing assets. Once the pair sells and closes he begins on his next 4, & we rinse and repeat.

The quadplex is 100% filled.

Because we have done the exact same business model so many times, we know exactly how the expenses play out along with what these are going to net. I actually just sold and closed on 2 duplexes and a quadplex that was from the same investor, 4 months ago and then the last one 2 months or so ago. Those investors are in line to walk these as well.

Along with the purchase, I can also give a referral for the PM that works with all of these gov. rental programs, which basically guarantees a near almost zero vacancy rate. Another great thing about this particular business model is the fact that it's literally recession-proof! I'll attach the website link for these properties so you can look everything over. I can have the owner put together a P & L as well, if you'd like. I also have the seller that has his own property management company and offered free property management until next year.

If you move on the quadplex and close quick, we will give you the absolute BEST deal we're able to once that 1 is filled and signed. VOA is paying half of the rents on each one, the one tenant is that pays cash is a long time truck driver. We can raise the rents on one unit 521 B it will from $860 to $897 which is an extra $450/yr not including the $400/mo/garage.

And deets from their spreadsheet:

Beds/Ba

Sqft

Lot Sqft

Year

CAP

Type

Rehab Cost

Asking

ARV

$/SF

*Rents/Rented

Vacancy

4/4

1632

5445

1920

12.48%

Quad

$0

$255,000

$328,146

$201.07

$3,614

Rented

Michael Smythe · Answer

@Joshua Jones too many questionable claims/promises for this to be 100% legitimate!1) Reviews can be bought.2) Veteran tenants? You mean professional tenants that know the law better than you do?3) "almost too good to be true" - EXACTLY! If the numbers are true, investors would be beating down their doors to bid up these "opportunities"! Why would they be chasing you?4) "basically guarantees a near almost zero vacancy rate" - Section 8 doesn't work this way.5) "the fact that it's literally recession-proof" - really? Typical sleazy sales pitch with ZERO supporting info.6) "I can have the owner put together a P & L as well" if they've done this numerous times AND were professional, they'd already have a P&L ready to go.7) "I can also give a referral for the PM" and "the seller that has his own property management company" - which is it? Seems they are making so many "promises" they can't keep them straight.8) "offered free property management until next year" - ---FIRST: no one gives anything away for free, so the cost will be included in the price you pay. Why would they do that and give profit away? Usually because they are making so much money on their scam that they can afford to.---SECOND: If it's free, then how good is it going to be?Highly doubtful this is legit, but do your own due diligence.

Jay Hinrichs · Answer

I suspect Veteran tenants he is talking about Military.. I am not familiar with any Military housing vouchers .. not that they dont exist I have not heard of them. Other than hurry someone else is looking at them and the free management ( red flag ) one just needs to do proper due diligence and there is no need for HML on these if they are rehabbed and rented..

Jad Boudiab · Answer

@Joshua Jones fair enough, good call for now. Good luck with your journey.

Bruce Lynn · Answer

#1....my first thought is where do you get hard money for 24 months? and if you can find that what does it cost you. Typically what I see right now is 14% for 6months with 2% origination fee and if you extend that it is another 1-2% every six month on origination fee. I never use hard money though and those numbers are very casual conversations with other investors and hard money lenders.#2 If it is rehabbed already why would you need hard money?#3 Typically with hard money you cannot occupy the property, couldn't understand if you want to have them purely as rentals or househack.#4 How do you move in if they are 100% occupied?#5 Where are these? To find multiple and consistent small multis where the prices work that all need rehab and there are a steady supply of veterans that need units seems a little suspect to me. Maybe somewhere, but sounds a little rosy to me. This almost sounds like Detroit or Gary or Cleveland. Have you seen the neighborhood or inside the properties? Is it in an area getting better or worse. How old are the properties? If they're old is plumbing, electric, HVAC newer or new and are they LBP certified?#6 I have no idea what VOA is or how that works....if you don't know either, I would have a long, in person discussion with the people that run it and find out the complete story...do they intend to pay 1/2 the rent forever, is there a time limit, how long do people stay, do they budget for rent increases, what causes people to loose their subsidy, do they have annual inspections, find out the good/bad/ugly, etc.

Joshua Jones · Answer

Yeah, after talking to others, I'm not going to purchase anything from a wholesaler until I'm a little more experienced.

Jad Boudiab · Answer

Joshua, where are you buying this one? I recommend you find a third party, an experienced local agent or a real estate attorney that understands that market well, and get a second point of view on the deal. The more insight you can get on this from people that are NOT the wholesaler who's incentivized to sell you the deal, the better.