There is a fourplex for sale in my city that started at $149k I have talked him down to $140.
I am very interested in the unit. Here are some hang up I have. Right now the tenets are in a program that get homeless people off the street. Guaranteed rent to be paid by the city, and they have a case worker that visits the units once a week to check on things. Would you do this?
Rent is $474/m
expenses $418/m per previous owner.
Whats is your opinion BiggerPockets?
My opinion is, there are a ton of other properties out there in your price range that will cash flow MUCH more than $56 per month. How many unexpected repairs or vacancies would it take to wipe out your profit for a whole year? Not too many. I'm not familiar with the Wichita market but I would venture to guess you could pick up a SFR or Duplex for about the same price and earn much better cash flow per month. If you have to put 20% down that's less than a 2.5% return on your money.
Best of luck whatever you decide to do.
I'm a fellow Wichita investor, that return is very low. In this market it's not to tough at all to find a 6-8 cap
It is $475 per unit. with four units. Does that change things?
are you expenses 418/mon/unit. If so that was already factored in. To calculate the cap you look at net operating income of 2688/year and divide by your purchase price of 140k to get 1.92%. This calculation is missing allowance for vacancies and non payment of rent and maintenance /capital expense. On some thing like this I would carry 10% of rent for each.
I used to live in Wichita myself!
If the expenses you noted are truly all that it takes then this seems like a good prospect...over $1400/m CF!
I would dig a little deeper on what your expenses and repair costs would be. Try using the analysis tools on BP. These will be very helpful to you in thinking of expenses and crunching numbers you might be leaving out.
From what the owner is telling me the expenses are $418 total. That does seem a bit on the low side to me. But I am new at this.
What up my brother !!
Long time no talk ---- Had NO clue you were on bigger pockets :)
Miss you down here at Enterprise in Wichita ; hope things are going well for you in Indy.
I would never purchase anything the renter isn't paying for 100%. I know your viewing the guaranteed payment as a positive but for me that's a huge negative. This leaves you open to so much exposure ---- many will trash your place and not care ; they won't take pride in ownership of something being handed to them.
Also for $140k ; your loan is going to be around $1000/month. After expenses you won't profit and you might even negative profit. Instead you will spend all your time repairing damage that will cause you to have a high rate of vacancy raising your costs.
My advice if you have $140k to spend would be to play it safe ; find a nice single family home in a nice neighborhood that you can rent for $1400/month that will bring a high end low maintenance tenant where costs are very low.
Save up ; wash ; rinse ; and repeat.
Thanks Westin, good points.
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