A Birddog Sends Me a Boatload of Deals

The birddog who sent me info on this deal sent me an email last night regarding 12 possible properties from the same owner. It appears the owner - who is from California, I might add - went on a buying spree in 2003 and 2004 in the area and bought these 12 properties. He's now fallen on hard financial times and needs to get the unloaded. Of the 12 properties, though, only four were in my farm area. The others were located in far south and west Austin.

The birddog did a nice job of analyzing the properties, too. He sent me a spreadsheet with the property specifications and the financials - loan amounts, interest rates, etc. I still did my own research to verify the information AND to make sure there were no problems. It turns out the info the birddog sent was about 99% correct, and the properties don't appear to have any liens slapped on them, which was good news. Unfortunately, after doing some due diligence with the financials, all four of the properties would be alligators going the buy-n-hold route - even if I took them Sub2. The cashflow goes from a high of -$340/month to a low of -$176/month.

I then decided to run the financials through my Sub2/OCF tool, but the tool only supports single mortgages (work item). Each of these properties carries two loans, so I had to do it manually. From my analysis, only two of the four properties would make ideal candidates. The other two properties are "iffy" in that the subdivision they are both in has seen depreciating market values the last couple of years. I figure the area will start appreciating the next couple of years, but I'd hate to guess and put myself at risk.

For the first property, I determined it I could make a profit of at least $20,000 (and probably a few thousand more). The second property was slightly better with an estimated profit of $25,000 (or more). The two "iffy" properties would net me $15,000 each, BUT that's if the area appreciates at least 3.5%/year over the next couple of years. Seeing as how two properties would put a dent in my wallet already, I figure the risk and upfront costs just wouldn't make those two worthwhile. As it is, I figure even if I take the first two properties Sub2, I'd still need to fork over $12k in holding and acquisition costs. Once I get buyers in, though, that expense should turn into a nice $8-12k initial profit. I'd also experience a total of about $520/month positive cashflow from the loan differences, and then get a nice payday when the buyers refi the loans in two years of about $11k each.

Of course, I immediately replied to the birddog to get me in touch with the owner (it appears from some of the info he had). I'll need to take some of my profit and use it to pay the birddog, too. If he keeps sending me deals like these, we will definately have a good partnership.