Does this seem like a good deal?

8 Replies

I am currently new to investing and I have been looking into picking up my first multifamily home.  I think I have found a decent deal but I am still pretty new at running the numbers.  I was hoping I could get some insight from some other.  Here is the breakdown of the property:

Current four unit with all units occupied

Asking $260K

Taxes are $1,500/yr

Estimate insurance is $1000/yr

Current rents are $765, $730, $695, & $650

It seems like the numbers would work but I am sure I am forgetting things since I'm such a newbie.  Any help and advice would be greatly appreciated.  Thanks!

What are other 4 families in that area selling for?

What is the condition of the property?  Deferred maintenance?

Who pays utilities?

How are you financing?

Without plugging in all the numbers and not knowing who pays what utilities, I don't think there will be much cash flow, if any.  That doesn't mean it's a good or bad deal necessarily.  

What is your  long term plan?  Buy and Hold? 

Originally posted by @Darren Budahn :

What are other 4 families in that area selling for?

What is the condition of the property?  Deferred maintenance?

Who pays utilities?

How are you financing?

Without plugging in all the numbers and not knowing who pays what utilities, I don't think there will be much cash flow, if any.  That doesn't mean it's a good or bad deal necessarily.  

What is your  long term plan?  Buy and Hold? 

 I have been looking at it to buy and hold. The renters pay the utilities. I haven't had a chance to look at the property yet for condition etc. as far as financing I would be putting 20% down and financing the rest through the bank I work for. The bank will give me a nice lender credit to cover most of the costs of purchasing and a quarter point off the rate since I'm an employee. 

What is the market price for this building ? Find the way to get a discount to market price.

Definitely a plus that the tenants are paying the utilities.  It's also great that the bank is giving you such good terms.  Regardless, I don't think you're looking at great cash flow, but that may not be your goal.  

What are other advantages to get this building ? How safe is the location? Is it appreciating ?
Taxes and insurance look very reasonable. It looks like you have a potential to increase a rent with new tenants. Start your offer at 240K if it is not a hot deal for this location. you never know what is the seller's bottom line. If it is really hot deal and you was looking for it whole year - you have a feeling already - to bid up or down
If it is a hot deal for your area - you may have only few days to make an offer. After inspection you could make few thousands better - ask to replace old water heater, AC, furnace. If they want as is - price should be below market

Thank you all for the input. I'm mostly interested in cash flow at this point and luckily the terms shouldn't change much since I work for the bank. I think I'm going to need to learn more before I go jumping into anything. I was trying to use the 50% rule but I think my problem is not fully understanding all the nuances involved. I'm not in a hurry to jump into a deal right now so I figure I will just keep trying to educate myself and see where I end up.   

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