Brick 4 unit building fully rented at $425 per month (2 bed 1 bath each and about 950 sq ft each) $1700 total
Rents could be $550 per month
taxes are $1400 per year
There are about $3,000 in exterior repairs that owner is willing to leave on the table for new owner
The owner wants $69,000 for it.
Is it a good deal? If not, what is a good offer?
Hi,
Using the 50 / 50 rule on the surface this would be a good investment. Get a copy of the expenses from the current owners financials and make sure expenses don't exceed $800 to $850 per month. Also make sure rent records show a fairly consistent average occupancy and that these units are performing according to your market.
Keep in mind you want to raise rents gradually as you will lose tenants trying to go from $425 to $550 over night, probable a $50 dollar rent increase initially and maybe a $50 increase each year the next couple of years to come back to market rents.
You really need the complete financials to review before a final decision but a contract and some contingencies will lock you in and provide time to review all the paper work.
GR
WOW… Thanks for the quick response and great advice. Thank you so much Gold River.
$1,700 GSI (Gross Schedule Income)
-$ 850 Less GOE (Gross Operating Expenses) inc/ VAC
$ 850 NOI (Net Operating Income)
Rent/Price Ratio = 2.4%
CAP Rate = 14.7%
What are the comps? Is this a house, that’s all cut-up (butchered) into non-permitted units?
Is there adequate off street parking? Is there parking off street?
Are the utilities separated?
Frankly, this sounds like a low-end ghetto-type property, that’s hard to manage, and/or it’s a house-conversion project, which is why the rent/price ratio is so high.
Make sure it’s zoned for four units.
If it looked clean and functional, and I could actually get half-way decent tenants to pay me $450/mo unit, I would jump on this thing.
If it’s over a 10 cap building, you should be tying it up with an escape clause such as “offer conditional upon results of a home inspection” and then asking questions. Buildings with over a 10 cap with “950 sq. ft apartments” usually get offers from day 1.