I am considering purchasing a 30 unit Section 8 Low Income REO building 22 2+1 and 8 3 + 1 for $320,000. My question for those of you who own apartment complexes is do you thing this is a good deal? especially for a out of state investor, since I am in California and would be giving it to a professional management company to manage and what should I look out for. The building specs are listed below. By the way the 2 bedroom units under section go for $498 and 3 bedrooms for $561. Vacancy presently is at 15%
The building was build in 1978 and bout 40,000-60,000 for upgrades. The Roof is also new. The reason the bank want to get rid of it is that 12 units have been vacant for about 10 months and according to them any new applicants do not get qualified under section 8, which to me sounds crazy, since they have not been listing this building with the local Section 8 as available units and why would any building be forced to only rent section 8 , I know they have a contract expiring soon with section 8 but why they only consider section 8 is vague and will be addressed in due diligence time frame.
Another major consideration is that the previous owner payed for all utilities and converted the building to a master meter even though it can be reverted to individual meters with some cost. Hence the utility bill annually is $40,000 considering the heating is electrical baseboard and nothing in the units is energy efficient. Even with this cost considered the building with cash flow once all units are rented but what would you recommend me doing, keep the utilities hence reducing my vacancy rate since the competition doe not offer all utilities paid by the landlord, changing the heaters to energy efficient heaters to reduce cost or turn the building back slowly to individual meter. You must understand that in the county if tenant fails to pay the utility bill then the landlord is responsible for the full amount.
Any comments would be appreciated.