1st multi-family deal. Advice?
I'm new to this site, first post.
I'm looking for opinions on a deal I have just began to pursue.
24 unit
12- 1 BR
12- 2 BR
6- 4 unit buildings
Tennants pay heat/elec
Landlord water/sewer
3.25 acres
asking $720,000 or $30,000 per unit
Smaller mid-Michigan town near expressway
Some updates have been done, for the most part apartments are worn. Landscaping and curb appeal are poor to marginal at best. Colonial looking, with brick on front and aluminum siding all around. Built in late 60's, early 70's. Window A/C units.
FSBO, an attorney who is stretched "too thin". On first call, owner stated he gets $425 per month for 1 BR and $525 for 2 BR. He also stated they used to be 100% rented, now he has 4 empty. I tried finding leasing info in the local newpaper, phone book and internet and couldn't even find any information. My initial feeling is that these are poorly managed and marketed. I'm not going to get rich flipping them, but should produce a steady cash flow in the years to come.
I called him back a few days later, asked him if he would/could provide some numbers to back up what he said because I was going to begin raising money. He sent me his tax return with the following information:
Gross Rents: 104,717
Advertising: 754
Cleaning & Maint: 7,627
Insurance: 5,364
Legal fees: 558
Interest: 7,548
Repairs: 9,907
Taxes: 15,350
Utilities: 2,133
Depr: 11,849
Other Fees: 1,117
Garbage: 916
Water/Sewer: 10,266
Total Expenses: 73,349
add back in Depr. and Interest and you get a NOI of about $54,000.
As you can see, it looks like he either over-stated the amount of rent per month or under-stated his vacancy rate.
I have a lot of questions, but I'm looking for feedback on what the economic value of the property is.
Would it be an insult to offer 15% below asking price? You don't buy "potential income", you buy existing income and cash flow, right? I have money for 20% down, but have not yet pursued financing.
Owner stated he has existing bal due on a land contract, he's showing paying $7,500 in interest. What does that mean?
As I said, this guy is selling them himself. I would like to enlist the help of an experienced real estate agent. What's the price on that in Michigan for multi-family deals?
I intend on buying and holding and improving the worn apartments over time as they turn over. I'm CFO for my family owned beer distribution company and me and my wife are looking to get 3 buildings within the next 10 years. We currently have a couple single-family.
Any feedback on what to do, or especially what NOT to do would be appreciated. Keep up the good work!
Mark