I am looking at investing in the multiunit market in Oklahoma. I would like to know what everyone thinks about this property. I have not walked it yet, but have done a driveby. All information below is from the internet per the seller's statements and income statement and rent toll.
In Millers Addition, near downtown OKC
Multiunit 4plex apartment - (total 3626 sft per county assessor)
Built in 1926
Main entrance opens to hallway with stairwell for the upstairs apartments, all apartments have an interior door.
each apartment is 900 sft, 1bed, 1 bath
many updates have been done in the last 2 years
Not sure about updated plumbing and electric, need to find out.
4 car garage with 2 units over the garage - (1035 per county assessor)
There are a total of 6 units.
Main laundry somewhere on site, not in the units.
Owner pays trash and water bill
rental roll shows 2 short term rentals which we would probably turn into long term rentals. They are furnished apartments so need to see if the seller is selling them furnished or not.
other 4 units are as follows
#1 900 sft rented for $600 leased until 12/31/2014, moved in 12/10/13
#2 900 sft rented for $500 lease expired, moved in 11/3/2010
#3 906 sft rented for $550 lease expired, moved in 2/1/13
#4 900 sft short term rental expires 7/22/14
#5 600 sft short term rental expires 7/23/14
#6 600 sft rented for $450 lease to 8/31/14, moved in 8/11/10
Rented units total $2100 and am thinking that #4 could rent for around $600 and #5 could rent around $500. If so, this would be $3,200 in rental income
Expenses Total $1320
$174 per month real estate taxes
$250 per month insurance probably thru national real estate insurance group
$75 per month water
$75 per month trash
$160 per month allocated to the 5% vacancy
$267 per month property manage fee
$320 per month maintenance at $10%
Operating expenses would be 43%
Yearly net operating income would be $22,560
Monthly cash flow would be $1880
With no loan CCR is 36.68%
List price is $325,000 but going to try to get it lowered
Need to do a loan though which really brings into question if this is a property to look at.
I can make the 20% down payment with my funds (heloc loan at 4.75%) and a gift from my parents but this will be a loan thru an LLC so a commercial loan. I do not know what the rate and terms will be on a loan like this. If this would be a stated income loan, are the figures good enough for a bank to accept? My personal bank will do the loan but it has to go to another area of the bank being this many units and he does not know the rate and terms yet. Lower units, my banker did 5% balloon at 5 years, monthly payment amortized over 5 years.
Would like your thoughts about this property and loan possibilities. Do you think central laundry will be a major problem finding renters? So far, my rental manager has only gone 2 weeks with no renter on another house that is now on the 3rd renter.
Thanks for the help.
Not sure about this one. I'm fairly new but if you are pulling in $1880 NOI, how much of that would be used up by the P&I?
Let's say you got a 30yr note at 6%, it would be about $1550 a month. That leaves you with $330/month cash flow for 6 doors. That doesn't seem good.
Even if the loan was at 5% (30 years), you'd be out ~$1400/month leaving you with $480 cash flow. I know those probably aren't the most realistic loan terms seeing as how it's commercial and you are talking about a different loan all together. Just looking at it from one perspective as I have 0 experience with commercial loans.
If you did buy it with cash though, it's over $300/door which isn't bad at all for one big purchase.
Completely off topic but have you thought about partnering up with someone to do a multi-unit purchase like this or larger? There are a few decent multi-units in OKC I've been looking at but not sure I'd want to go it alone just yet.
In OKC, from a high quality portfolio lender, we pay 6% interest on 15 year money. We have not found 30 yr money for commercial notes but we haven't looked very hard. Also, I have exactly this type of units in Miller and we plan on 10% vacancy. My very preliminary thoughts. Feel free to PM me and I can probably help you think this through.
I would keep looking. Your projected rents are around 1% of asking price. At that rate, you could buy very nice single family homes that would have lower vacancy and lower expenses (tenants would pay their own water). Or shop around for a multi-family property that will give you higher rents for your dollar.
@Account Closed agreed!
The main reason for looking at this property was they stated on the listing that income was $4,000. After getting the rental rolls, I do not know where they got $4,000. They do not have that now and did not have that last year. If rent was really $4,000, I would not be questioning this deal. Now it will be trying to get the price reduced but I am not sure they want to sell it that bad. I will be having it comped and we will see where we go from there.
i have thought about partnering with someone, but have not asked anyone as I only know 1 other investor that might be interested. However she is my boss at work so might not be a good idea if things were to go haywire with either the job or the rental.
I agree with Account Closed and would keep looking.
Good luck with this or another deal ! I read somewhere where you could ask the seller for schedule E ( I think ) of their tax return which details income etc. Maybe you could request that.
if you pay the water, $75 is very low, think about $30/unit on average. This includes sewer and trash in OKC.
You all have been a great help on this. There seem to be too many questionable items about this whole deal. But the income not being what was advertised on the listing really throws a wrench in all the numbers. I will pass this one up and continue my search for something else.
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