I have found a deal where the property is free and clear…
and it has a possitive cash flow…owner currently pays all utilities but this property cannot support a mortgage payment unless tenants pay all utilites my question is how would one find out what the cost would be to seperate the utilities and can I ask the seller to give a cash credit at close to pay for this(some or all)
i looked at your other post regarding this property and there seems to something askew. Either the asking price is way out of line or the expenses are way out of line. I have been in property mgnt for over 15 years and it seems to me that a unit at 35k (350k / 10) with a 700/month rental rate should be able to be backed up w/a mortgage. This leads me to believe that the expenses are out of wack especially since you say the property is free and clear.
I would do due diligence on their operating statement and find out where all the money is going. Do they pay a superintendent?, Is the owner saving funds in a repair & replacement account?, etc.
It just seems to me that a 350k 10 unit building with 7k/month rental income should be able to sustain a mortgage. Another way to look at it in its most simplest of terms is that my house (just sold) 350K didn’t have 56K of expenses against it. Although this is commercial and tends to have higher costs it just seems way out of line.
Ask for an income statement/operating statement to see where the mony is going. The owner is probably sucking a big part of those expenses out of the property.
My best guess with info provided.
KEC
Thanks for your respond…I do have the op report and it shows the owner getting 4000 a year and the owner also pays the utilites that were about 29,000 in '04…
WoW - utilities very high.
My whole house 4br 2.5 bth heated garage, 2 fridges only come to about 2000/year (elect,gas,h20,sewer) in NJ - the most expensive state in the country.
Sorry-couldn’t have been more help. Could you find similar complex and see if they are at same rate? Just seems out of line. Utility companies must think they are selling oil!
4K per year is just not enough for that investment. It wouldn’t even pay for 1 unit for yourself if you wanted it, yet alone if you need to have a major repair done. Maybe a lease/option buy could make it work if right terms could be aquired, or maybe some owner financing. Just seems theres not enough there to make this a good deal.
Not knowing the location of property or its desirability, age,type of mechanicals.
Yes, Utilities are too high–something is wrong—or rents are too low. (without more info on complete expenses and property info–can only quess).
If you think you can correct the problem and have funds to invest–it appears you may have something. Can you convert to condo units (when you separate utilites).?
“As is” doesn’t look like a look deal—without more info