What should I offer - if anything?

OK, reiclub, I have a potential opportunity that I want your feedback on.

15 condos that are rented on various 2013 - 2014 leases for $525/mo. There is a $245/mo maintenance fee, per unit. (ouch).

That tells me, basically, I’m getting $280/mo in rent and should pay no more than $14k per unit.

*All units are rented
*Tenants pay utils.
*Taxes are about $250/yr.
*I can manage them myself since they’re close by (and near another rental I have).
*I’d have limited marketing (for now, but not long term.)
*rents vary from $450 - $575, but average $525
*I don’t know about deferred maintenance.
*Not the best neighborhood, but once was, and surrounding neighborhood is trending upward.

What else should I consider?
I want to offer $175k for all of them and see what comes of it.

I need to think how I’d finance them since there are 15 separate units. Any thoughts on that?

Thanks in advance

You need to look into the deferred maintenance and the financials of the association. Will there by an assessment of $1000/unit to fix the roof the day after you close?

I don’t see much profit when you consider taxes, insurance, vacancy, management, repairs… I would have to take a hard look at them even if they were given to me for free.

Your NOI looks to me like it will be less than $40,000 a year.

Of course, whatever figure that is, is what’s available for debt service.

Your debt service is likely to something less than $13,000.

So, whatever more than $13,000 your NOI is, that’s what your cash flow will be.

I would want to do this deal at $175K.

I think my exit strategy would be to sell these off one by one (to the existing tenants) with seller financing. Could you sell them individually for $30 or 40K?

A $20K equity spread times 16 units is over $300,000 in profits. Not too shabby.

Yeah, this is something I was thinking as well… Even if free, a couple of vacancies and a couple of maintenance items could wipe out a year’s worth of profit.

Javi, they are currently listed at $15k individually, so the market for them at $30k isn’t there (yet). The current residents are mostly going to be bad credit / low pay… these are “condos” in the hood. I suppose I could put them on high interest notes, anyway… but then I’d be looking at spending money to foreclose, etc, unless I sold the notes, which I don’t have any experience on.

Thinking out loud… Maybe I buy four at 10k and sell’em to the existing owners at $15k on a note. But even that would cost more to the existing tenant than their existing rent, as they’d be responsible for the mortgage, the condo fee, taxes, and insurance…

i think the high condo fee kills the deal, even at $1.

Thanks Pete & Javi, for helping me collect my thoughts on this.

The only thing left for me is to find out if others in the same complex are paying more in rent. If I can get all the rents up to $600, the numbers start to look more reasonable.