Ok, so I found another property. This APPEARS to be a good deal. Here’s the property info:
8 plex near a university
ALL units rented according to wholesaler
each unit rents for $380
wholesaler is working on getting rent rolls
asking price: 24k
built in 1974, 4700sq ft.
monthly income at around $3k per month
doesn’t need repairs according to wholesaler
My question is, would you do an 8 plex for your 1st rental deal? I will say I’m definitely committed to doing what I need to do to handle vacancy, repairs, contractors, work myself, etc…At this price, it appears like I could get a property management co and still make decent money?? Also, it is about a 45 minute drive for me. So it’s not very close to me…
Looks like a pretty solid deal to me. As far as whether you’re ready to handle an 8 unit bldg, I couldn’t tell you, but the numbers look pretty good as far as the 50% rule goes.
How do you plan to pay for it? Conventional loan? Cash?
Yea, the numbers look good…if you’re gonna get wet, you might as well jump in (just don’t want to drown) Any thoughts on how difficult it might be to keep up or handle an 8 unit 4700sq ft. apart.? I suppose it did get to be to much, I could always get property management. As of right now, I’d like to get opinions on doing it myself though with my own repair guys in the area or doing some repairs myself (although I’m not sure I’d want to drive 45min every time something needed to be done).
I jumped in with 8 units 2 years ago. And that deal wasn’t nearly as good as your numbers look. If you can find solid tenants you shouldn’t have any problem at all running it.
Well I can say that if it’s a 45 min. drive for you, the gas alone will kill you. Contact a property management Co. in the area and have them look it over before you buy it. They may be able to point out some things. Your time will be better spent ON the business than IN the business. You may even find other properties in the same area. Good luck.
About how often on average do you go to your properties? This is somewhat a reason why I was looking at getting some repair guys in the area or property management.
I asked the wholesaler if I can see the property but all units are occupied and so I cannot. I’m wondering if I should go ahead with the contract. Earnest is $500 non-refundable and $2500 refundable during option period.
I also forgot to mention this is listed about the property:
Actual cap rate = 10 Cap - Upto to 12 Cap at market rent
If I have the cap rate formula correct, if the cap rate is 10, that would mean at 24k it’s only $200/month cash flow??
With a purchase price of $24,000 and gross monthly rents of $3,040 ($36,480 per year), the cap rate is about 76 (seventy six), not 12!!!
If the purchase price is indeed $24,000 and the gross rents are $3,040 per month, this is a FANTASTIC DEAL! Of course, that assumes that all the rest of the due diligence is good: i.e. the property isn’t condemned; not gang headquarters; etc. I’m wondering if they mean that the purchase price is $240,000? That makes more sense based on their stated cap rate and the usual fantasy expense numbers!!!
You are right…(unfortunately). The wholesalers ad is $24,500, but when I verified the price she actually wants 245k. So no deal… Thanks for your comments and input anyway everyone.
Im sure you mean the 8 plex just south of UT Arlington.
This property will not cash flow, but you may have a better lender who can get you better terms, in any case i think its way overpriced.
The 8 units really need work and at 11,500$ she is totally underestimating the cost of maintenance, I would look at that number VERY closely, especially since the CP is 245,000$.
One more thing, dont think you can increase rents to increase value, at 375 even a 20$ increase can upset the cart because just a few blocks North there are slightly better apts hovering at around 450$.
Good luck either way, lucky I cleared it on this site, before making a decision.
Do not under any circumstance, close on a building without a full inspection of every unit and don’t take no for an answer. For an 8 unit building, this will be easy. Your offer should be contingent on this.
For a deal this size, all money goes hard at the closing table. Period. In any event, money never goes hard before inspection and a reasonable amount of time for due diligence. They can ask for what they want, but you can negotiate or walk.
What’s a wholesaler doing trying to market a building this high over retail? Do you know and trust this person?
Any thoughts on how difficult it might be to keep up or handle an 8 unit 4700sq ft. apart.? I suppose it did get to be to much, I could always get property management. As of right now, I’d like to get opinions on doing it myself though with my own repair guys in the area or doing some repairs myself (although I’m not sure I’d want to drive 45min every time something needed to be done).