Should I wholesale or owner finance these 10+ rental properties?

Question

Hello All,

My partner and I are new to wholesaling and would like some advice on how to approaching our first potential deal.

The seller is old, has a full functioning business and lives 75 miles from the properties in the midwest. He simply wants to rid himself of the properties so he doesn't have to worry about them anymore. (He's owned them all 15+ years).

As we live in the Bay Area, we don't know if wholesaling,convincing him to owner finance,  or finding funding to put a down payment is the better option. We currently have no capital so we would need to find some type of financing to take on the properties.

Real Estate has been declining in this city as well, but the seller makes a good amount of money on rental income each month and has for 15+ years.

Any and all advice is welcome. THANKS!

Samuel Bavido · Answer

Why is real estate declining in this area? Make sure you have a solid understanding of this before you commit to anything. Perhaps they're near the bottom of a down swing and this a great time to buy. Perhaps the mill just closed down and there is nothing to keep people on that part of the map, which means you're looking at buying part of a ghost town.

If you don't know the answer to this question you are far more likely to lose money than make it.

Aaron Mazzrillo · Answer

As you get into this business, you'll discover seller profiles. Along the way you'll talk to lots of "sellers" who are old, tired of owning their cash flowing portfolio, and are looking to sell. Unfortunately, 99 times out of 100, they are old, bored and just want to play games. One doesn't get to owning 10+ rental houses because he is an idiot and it is an accident. He's quite savvy and is most likely looking to take you for a ride because he knows you don't know what you're doing.

The last thing I would do is get on a plane and go look at anything until it is under contract and the seller's signed docs are back in escrow. Any money spent before will surely be nothing but an investment in education on your part.

Nathan Schoenborn · Answer

Also, older sellers are usually not interested in owner financing, they just want to cash out. (In my experience)

Inetta Bell · Answer

I must agree with Aaron don't let 'old' fool you they are very knowledgeable of the real estate game. He knows you want his property very badly and probably won't sell.

Shawn Ackerman · Answer

Hey @Marc Hardy the answer to your questions is "it depends..."  I wholesale properties in Milwaukee where I also invest and each deal is different.  If my capital is differed then I elect to wholesale.  I also do coaching and help new investors get started in the Milwaukee market so if it's a good property for one of my coaching clients I just sell to one of them.  So again, "it depends".  I guess it will also depend on your return on investment, your management team in place(Not the current management team, yours), how much differed maintenance are on the properties and occupancy.  Sorry I couldn't give you a straight answer but the question is pretty loaded.  Always remember to persist and you will WIN!!!!

Marc Hardy · Answer

Thank you all for your help so far.

I do have a partner there who has gone through all of the properties and sent me photos and videos of each one. All repairs seem to be cosmetic as they are all being lived in now.

The comps seem to be a little misleading because there simply aren't many to look at. Also, he already has a team in place that handles all lawn care, maintenance etc. that he is willing to pass on to the buyer.

After further research, the trend has only been downward in the last couple months but has remained steady over the last ten years but doesn't seem to be going up.

Would you all suggest getting a contractor's estimate before making him a counter offer or can I wait and adjust my offer later depending on what the contractor finds?

Brent Coombs · Answer

@Marc Hardy, welcome to BP. My first suggestion would be: buy a plane ticket and get over there to check 'em out. Meantime, research and research. What have OTHER similar properties in the neighborhood sold for? Who'd MANAGE the rentals for you? Who'd FIX 'em up for you? How do you KNOW they're worth more as-is than the asking price? Neighborhood "C"? "D"? Worse?

The biggest concern for you/buyers could be: the DEFERRED maintenance "ouch"!

Remember, what looks cheap to Californians do NOT look cheap to locals in the midwest. Cheers.

Should I wholesale or owner finance these 10+ rental properties?

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