Does property flow matter more than size?

5 Replies

  I am getting ready to make an offer on a multi-unit property but I'm torn between which is more important: flow or size.

Flow

  I'm considering a 2-unit property in downtown West Chester, PA. The property was converted from a large corner townhouse into two separate units. As a result, the bathroom in the first unit is located at the back of the unit. Specifically, you must walk through the living room, kitchen, bedroom, and office to get to the bathroom. Obviously, this is not an ideal layout for the apartment. The flow of the second unit is better, but also not ideal.

Size

  Despite the above issues, the property is approximately 1.5-1.75% larger that other townhouse selling in West Chester at the same price point. 

  Which is more important? The flow of the property, or the size of a property in a town primarily composed of small 100+ year old homes? 

Thank you! 

I say the first unit is a deal breaker. Thats too much in my opinion. I dont know your market so I could be wrong but it sounds shady.

If it's already split what are the rents? Is the "poor flow" rented? If so how much. (Does the rent reflect the poor flow) if both are vacant then I would look at comps and try to determine what a poor flow rents for. (Both units I would get comps for) if all fails ask a local realtor on their thoughts on the poor flow rent. I guess in my mind I would be ok with the poor flow if it was a strong rental market. As for size again I would be looking at comps with like situations vs the size of the building.

hi Joel,

Welcome to BP and I'm happy to see you are interested in the West Chester area. West Chester is a great little town with a very strong rental market. A lot of units in town will have "chopped-up" layouts due to conversions, etc. Rental history should give you a good feel for the discount rate the "poor flow" will have on the unit. One thing to be aware of In West Chester is the fact that there is a restriction on student housing and the town is not currently giving out any additional student rental permits; unless the property already has a student permit, the student subset of the market will be out play. Let me know if you have any questions about the area or want some help with comps.

Thanks, 

Mason

west Chester is a very strong rental market.

The units have not been updated for 12+ years.

Both units have been rented for 25 years

2 bed 1 bath : $675/mo a month (below market rate)

4 bed 1 bath : $1050/mo (below market rate)

You should only be paying for the value of the current rent that is being charge and not for the "market rent." Since the tenants have been there so long, the seller can't expect to sell you on the benefit of having long term tenants and below market rents. It sounds like the landlord has traded the incremental rent for the consistency of tenants and extremely low turnover. Be prepared that if you raise the rents considerably up to "market rates" you run the risk of losing those tenants.

Don't let the seller have it both ways.

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