Thanks
@PMJL34 @waltworks &
@Archipelago for the feedback / questions, I appreciate it. Hopefully I answered everything below, and my multiple quotes work (I've never done that before)
Wow, those are great numbers/rentals. Pat yourself on the back, you're doing great.
lol is there something you aren't telling us? Are they in f- neighborhoods or family deals or is there 10k annual property tax? I'm only half joking.
On a side note, someone please explain why or how a 65k house can rent for 1200 in 2020?
That's the price of a fancy car/truck. I understand living pay check to pay check and having shitty credit. But I can't help but to think that even those people can afford a 3.5% down payment (2k). Their P&I is less than $350. Even with 200/month tax and 100 insurance that's half of their monthly rent.
On the flip side, if these folks are so broke, how can the rents be as high as $1200?
Just doesn't make any sense to me.
Ha... I don't think there's anything I'm hiding. They are definitely class C properties. No family deals. Property taxes are high for the property value (IMO), but not extreme. The house this post is about has taxes = $1,600.
CONCUR on the oddity of the individuals being able to afford rent of $1200, but not the PITI of a $65K home. It continues to amaze me. I find it a little heart breaking honestly. Also for what its worth, this home is not renting for $1,200 (the $65K one we closed on in November is). Its renting currently for $900, which is grossly under market value ($1,300 -1,400). The tenant has been there for 7 years and takes care of the place. So I'm OK with that riding for a little while longer. We have notified them that rent will be increased, but I don't think we will bring it up to market value. We will probably bring it up to around $1,050.
Also, OP would you mind telling us more about your 6 home purchase?
I guess my primary questions are:
1) was it one owner/LLC that owned all 6 who sold to you?
2) why would they sell it if ALL 6 were VERY cashflow positive?
3) was there competition to purchase these 6 homes?
Thanks!
1) Yes, one owner
2) Not sure... he wanted out of the game. He bought these homes at the bottom of the market, so he definitely made quite a bit of money from the appreciation.
3) No, no competition. He wanted $340K, we countered and ended up at $320K in the end.
I am talking way too much, but I just took a long hot shower and I was thinking...
1. Someone sells a pack of 6 (homes, cars, toys, whatever) because they need to. Not because they want to. If all 6 homes were great, they would sell them individually. Instead, most likely, there's 1 or 2 homes they know that no one would want, but they need to unload it. So instead, they throw in 1 or 2 great homes and the remainder are "meh" homes. This happens in sports trades, this happens in pack of pokemon cards, and in everywhere else. All that to say, how is ALL 6 of your homes great deals? That doesn't make logical sense to me. There had to be some stinkers, even if it was just one.
2. If someone has 6 homes to sell, they have to have a baseline knowledge about real estate. They aren't just newbs you can easily take advantage of. Furthermore, you say all 6 homes are income producing, so the baseline knowledge of this seller is at minimum decent if they can amass 6 cash flowing properties. Now, there are a number of reasons why people need to sell off their investments so I know it happens. However, why would this seller not get a decent return, even if it's a fire sale? He or she must have known the true value of the 6 properties and wouldn't just sell it for cheap.
3. If there was this deal where ALL 6 homes were great, why wouldn't someone else pay more than your price for it?
My apologies for ranting. I am probably wayyyy off on my assumptions. Just had to write my thoughts down.
Don't apologize, I welcome the nitpicking... I don't want to miss anything either.
1) You are 100% correct about this. While all 6 do cash flow, I wouldn't say all 6 are GREAT. This original post home is definitely the nicest of the 6 pack (although not the nicest of our portfolio... the two recently purchased are the best we have picked up so far). All the homes are fine and cash flow well, but some need a little more work, are in a little less desirable area, etc. I'd say we got 1 great home, 3 Solidly good homes, and 2 meh. The two meh are still rented out with long term tenants at $800 & $850, but will need some updates sooner rather than later. I think over all the package was still a good purchase. We are getting appraisals on all the homes, so I am more than happy to come back and update this thread with those values once I receive them.
2) Agree... All I know is what was told to me: He knew he could get a higher sale if he listed them, but he didn't want the hassle. He also wasn't going to go back and forth on price (after out initial counter), or do any repairs. The inspections were all acceptable, but it was clear that this was an As-Is deal. I think he just wanted to cash in wheil the market was hot and he wanted to do it as easily as possible.
3) I think they would... if the homes were listed on the market.
I have seen people score amazing deals (always off market) recently via:
-Family connection of one kind or another (ie, family friend sells property for way under market as essentially a gift)
-Direct mail (ie, find some senile/desperate person to take advantage of by sending out 50,000 yellow flyers)
I am not saying either of those is the case here, but the OP's deal(s) certainly are not something normal in the current market and there's probably some kind of interesting story involved.
-W
None of the homes we have bought have been under these conditions. No family connection or direct mail efforts. Just the initial 6 pack off market cash deal, followed by two on market financed purchases. Honestly, our first MLS purchase is our best one yet. Its the $65K purchase, $7K rehab, $1,200 rent deal we closed on in November that I mentioned above which I think has been our best pick up. Once it get rented (goes on the market next week... worst week EVER), I'll update the thread with final rent amount.
@icebox92 have you looked into portfolio lending? There could be a lender willing to finance a group of properties in the same locale. I'd imagine the LTV requirements are higher but consolidating them could help keep overall costs down. When I spoke with my commercial lender yesterday he mentioned his bank is requiring 65% LTV at the moment.
We considered this, but honestly we needed to act quickly on the 6 pack, and I haven't slowed down to look further into portfolio lending. I need to though. Its on my list while I have some more time over the holidays.