Am I making a huge mistake with this 900k deal… or is it worth it

Seeking Advice
1

A family member is offering me a deal to buy 10 of his rental properties for $900,000, paid over 30 years. I would pay him $5,000 a month, plus $1,000 for property taxes. On top of that, yard maintenance would be $400, and insurance would be $450.

The total rental income from these properties is about $9,500 a month. I’m trying to figure out if this is a smart move or if I’m just getting myself into a huge mess. The interest rate would be 5.3 percent. He’s already replaced the roofs and fixed major plumbing issues.

What do you think? Is this a solid investment or a bad idea waiting to happen?

2

$450 a month to insure ten properties? That doesn’t seem right at all.

And $9,500 a month for ten rentals sounds really low.

This deal looks sketchy at worst and like a bad investment at best.

3

Mali said:
$450 a month to insure ten properties? That doesn’t seem right at all.

And $9,500 a month for ten rentals sounds really low.

This deal looks sketchy at worst and like a bad investment at best.

Could be an under-the-table rental setup… I’ve seen those before where it’s a bunch of undocumented units with coin laundry.

Either way, this sounds like a financial trap.

4

@Finley
Nah, everything is legal and property taxes are paid.

5

Vic said:
@Finley
Nah, everything is legal and property taxes are paid.

::wink::

6

Finley said:

Vic said:
@Finley
Nah, everything is legal and property taxes are paid.

::wink::

Lol no, really, everything is paid. If what you were saying was true, I’d wink back, I promise :joy:

7

@Vic
Taxes paid, huh? :face_with_raised_eyebrow: :::wink, wink:::

8

Finley said:
@Vic
Taxes paid, huh? :face_with_raised_eyebrow: :::wink, wink:::

IRS, is that you? :joy:

9

Vic said:

Finley said:
@Vic
Taxes paid, huh? :face_with_raised_eyebrow: :::wink, wink:::

IRS, is that you? :joy:

Nah, just my grandpa… but he’s dead, so you’re good.

10

Mali said:
$450 a month to insure ten properties? That doesn’t seem right at all.

And $9,500 a month for ten rentals sounds really low.

This deal looks sketchy at worst and like a bad investment at best.

Most of the houses are small—one bed, one bath. Some tenants are only paying $500 a month, so I’d probably have to raise the rent on a few of them.

11

@Vic
You don’t have to raise the rent, you want to.

You’d be buying these properties to turn a profit, but that would make life harder for people already struggling with a $500 rent.

Just be honest with yourself about it.

12

@Emerson
Fair, but we also cover water, pest control, and lawn care—and the rent hasn’t gone up in 15 years. So $500 for that long is an insane deal.

13

Mali said:
$450 a month to insure ten properties? That doesn’t seem right at all.

And $9,500 a month for ten rentals sounds really low.

This deal looks sketchy at worst and like a bad investment at best.

It’s not a scam, we went over everything today. The insurance covers plumbing damage, water, fire, lawsuit protection, and a few other things.

14

@Vic
If you’re about to spend close to a million dollars, you should probably talk to a lawyer, not just ask on this forum.

15

Jules said:
@Vic
If you’re about to spend close to a million dollars, you should probably talk to a lawyer, not just ask on this forum.

Agreed, I just wanted to hear some outside opinions. It’s good to get different perspectives.

16

I’m no real estate expert, but this sounds like your family member is trying to cash out while keeping you locked in for 30 years.

Even if everything goes perfectly, what about unexpected costs? What about lawsuits? Property management fees? Repairs? Tenant issues?

This seems risky, but I’ll let someone with more experience weigh in.

17

@Finley
The insurance covers liability for lawsuits, and I’d manage the properties myself. I’ve been doing it for a year already, and there wouldn’t be any employees.

18

Vic said:
@Finley
The insurance covers liability for lawsuits, and I’d manage the properties myself. I’ve been doing it for a year already, and there wouldn’t be any employees.

Okay, so after all expenses, you’d be making $2,647 per month. What happens if a few units sit empty? What about unexpected repairs? Are your costs locked in, or could they go up?

It’s not a terrible deal, but be ready for months where you might lose money.

19

@Finley
The agreement is locked in, and most of the big repairs—roofs, A/C units—have already been done.

20

Vic said:
@Finley
The agreement is locked in, and most of the big repairs—roofs, A/C units—have already been done.

If you’re comfortable with the debt and handling the properties yourself, it might work. Just make sure you have some savings set aside for anything unexpected.