BiggerPockets

Hello, I am planning on purchasing a 4 plex and wondering if anyone could help me work the numbers. Purchasing on a Contract for deed. Purchase price $120k, 5.5% interest over 30 years. $7500 down. No Balloon. New Roof. Total rents $2200, fully rented and has a long waiting list. Tougher area but not warzone. Still need to get expenses, but owner pays for gas, electric etc. Is this a deal to pursue? Thank you!

Looks good to me @120k.

Using 50% rule you have 1,100/month less DS of $630, leaving $470 net or $117/door. This assumes NO repairs/ cap ex.

Looked at another way, this deal is yielding an 11% unlevered cash yield ($1,100*12 / 120,000k). Sweet spot.

IS this a good deal or just so so? Also, on a contract for deed could my credit get worse if I default? Thanks

Are there any repairs that need to be done?

You should also make sure that you won't be inheriting any bad tenants (non paying).

Chris

You need to understand the utility situation better IMO. Somebody just posted on another thread that their new tenant ran up the electric bill that the landlord pays; see it here:
http://www.biggerpockets.com/forums/52/topics/38578-new-tenants-electric-bill-sky-high

Tenants won't conserve utilities unless they bear the burden of paying for it.

Thank you very much everyone.

Who pays the water? It sounds like you are buying an old house that has been subdivided if there is a central heating system. That would also mean there is a single water meter as well. Regardless, buying old houses that have been converted (correct me if I'm wrong) is generally a bad idea because they are maintenance nightmares. Combine that with owner paid utilities and you are looking at well above 50% expenses. I would find another deal.

If you are intent on buying a multi, look for something that is separately metered and I would only pay water if I had to.

Mike- What if I can get her to take $0 down payment? and why do you think this isn't a good deal could you explain in a little detail? Thank you again sir.

I have seen buildings where there were gas meters for each unit, but those meters only supplied cooking and the hot water heater. Still need to be certain that each unit pays for the heat being used. And some landlords do electric baseboard conversions, so in those cases there won't be multiple gas meters when cooking and hot water are electric.

Hi Greg. You can and should pursue sub-metering. I wrote several BP blog posts on the subject. Puts the onus of utility costs on the tenants. Bad news is you will have to implement at time of new leases.