My second (not as easy) multi-unit. Muncie, Indiana
- Location: 619 W Howard St, Muncie, IN
- Originally listed for $50,000, offer accepted by bank for $20,000 (cash)
- 8 Units (2 2BD/1BA, 5 1BD/1BA, 1 Studio)
- 4470sqft on a 7772sqft lot.
- Taxes $1646 per year.
- Assessed at $82,300, but appraises for $150,000.
- All units individually metered and legal.
- Built 1906, looks like it was renovated some time in the 80s.
- Abandoned by original owner since 2012 for reasons unknown.
- HVAC units intact. Partially finished basement. Windows intact.
- Interior...well...
I didnt want this building originally. I had flown to Indiana to look at another property but the numbers didnt work out. I was on my way out of town when my PM/Broker drove me passed this monstrosity. I did a cursory inspection. The asking price was just way too high, so I put in what I call a "screw you" bid of less than half the offering price. There was may be a 5% chance it would be accepted. And low-and-behold it was.
Lets just say, I've seen worse. Each unit required around $5500-$6000 worth of rehab. This is not including fixing an active roof leak on a rubber roof and repairing the common areas ($5000)
- 8 units x $5500 + $5000 roof repair/common areas = $49,000 repair costs. (Or so I thought)
- Potential rents ($3550 gross with all units rented) Five 1BD @ $400/unit. Two 2BD @ $600/unit and one $350 studio. Utilities separate excluding water $250/mo (est.)
Everything was pretty smooth until I hit a snag. Namely, this guy.
***A WARNING TO INDIANA INVESTORS***
If you buy a commercial building with 60 amp breakers AND the power has been shut off for ANY reason, the electrical companies in the state WILL NOT turn your power back on unless you upgrade to 100 amp systems. The reason being these old units tend to EXPLODE if left off the grid for too long. I have had multiple in-person meetings with some electricity big wigs in the state to confirm this fact. That means the main panel and all the sub panels must be upgraded and signed off by Indiana Power (or whoever your provider is in state). This applies to properties with 5 or more units only. It is a state law apparently, so there is no real way to work around it So the above got converted into this:
Breakers were moved to the exterior of the property due to permit restrictions. All unit sub panels upgraded (some moved due to permit violations).
(You cant have your breaker boxes over stoves apparently.)
- Total added renovation costs $25,000.
Obviously not optimal, and my first major hiccup in the state. It ended up being a blessing though, as during the whole ordeal I got to meet the Mayor of Muncie, Dennis Tyler who is very pro-gentrification of his town. The town has a pilot program for investors to renovate the city's many abandoned properties. At the moment, they are focused on renovating Muncie's historic core, which this property is a part.
So after six months (of mostly waiting for those electrical boxes and permits), two of the eight units are rented, bringing in $950 of monthly income. The rest of the units should be online by next summer (hopefully). One of the units is rented at a discount to an on-site manager, but the property is professionally managed by Complete Property Care, LLC.
I had some plans to completely renovate the kitchens of all the units, but now that has taken a back burner to just getting units online. If anyone knows a decent company that will loan some cash for an 8 unit building owned free and clear, I would be more than happy to talk to them. If not, its just going to be a slow slug fest towards completion. Its cash flowing, and paying for itself finally. Not optimal, but still a decent deal for an 8-unit building in my book.