All 6 are rented out and cash flow 12-15k per year. The roofs will need replacing in 3-4 years but aside from that they’re in good shape. My concern is structure damages 10-15 years from now and eventually selling them in the future. Total purchase price would be $400k, putting 15% down and borrowing the rest at 4.5% for 20 years. Recommendations would be helpful on whether I pull the trigger or pass. My main concern is how old they are. Am I looking at this the right way or not?
There’s no way to provide anything meaningful, without knowing the numbers first.
Use this analysis sheet to flesh out the numbers.
Fill out the sheet using the seller’s actual numbers, not pro forma numbers.
http://jaypalmquist.com/images/real-estate-analysis-form.png
Thanks for sending over this sheet!
Aside from the numbers, do you see any reason for concern with the buildings being old, and a lot of maintenance/structural repairs along the way? Or am I looking at this from the wrong angle? This is my first residential buy.
There is ‘no aside’ from the numbers. It’s ALL about the numbers.
Otherwise, you’re just looking for conjecture. It’s all conjecture, until you provide the numbers. What’s the roof going to cost? What’s the price you’re paying for this turd? What’s the income? The vacancy? Who’s managing it? How much has management been costing, if anything? What have been the expenses? What’s been going on for the last year?
You know, why would I tell you to buy an old, structurally-rickety, six-plex, with a bad roof, unless the rent/price ratio was fantastic, or the GRM was ‘super’, or the upside potential put this at a 20% CAP? I don’t know why. Oh, wait! Yes, I do. I don’t have any numbers to back that up.
Otherwise, yes go buy this thing. It doesn’t make any difference what the income and expenses are anyway. That’s just numbers, and those are so ‘numbery’ and everything. pffft on numbers.
Fill that sheet out with existing numbers and come back and report the numbers.
Hi,
Be aware in 1970 this property should be ABS sewage and drain pipe, copper water pipe and modern electric panel boxes with modern breakers and grounded circuits, however there is the possibility of asbestos in insulation, vinyl flooring or floor tile or in floor mastic or in siding or original roofing if still existing under a second re-roof or original popcorn ceilings with asbestos.
Also beware of lead based paint.
GR
I am glad that you are thinking about future repairs of the building. There is always a lot of repair work as the building ages and this needs to be calculated. Try to think of all the expensive repair bills that you would incur in the future and then decide if you want to buy this building.
I’m not sure if 45 years old is the considered “old” for your market, but in my market of Winnipeg Canada that would be considered “newer” product.
I would say as long as you budget properly for capital expenditures and you still cash flow when taking this into account you should be fine.
You can also time your hold period based on when major expenditures will have to happen, so you can be out of the property before you need to make a major re-investment which you may not fully recoup.