Los Angeles, CA · Member since 2015 · 176 posts · 48 votes
I'm considering purchasing a 5-plex in Blue Springs, MO (a very nice neighborhood near KC Metro) because the neighborhood and deal look great, but I still have quite a bit of concerns that are preventing me from making the leap. Mainly because it used to be a single family home, and it was converted ~10 years ago. Now it's a torn-down 5-plex and 4 of the units need rehab.
Numbers = $75k purchase price, $35k repairs, ARV = $180-200k . Minimum rent = $2500/mo after repairs.
Obviously the numbers are great, but the place is gutted, has no separate meters (since it used to be a single family), and doesn't necessarily look/feel like a small multi-family building (it looks more like a house, since thats what it used to be).
Everything is properly zoned to be a commercial 5-unit, and the neighborhood is A-/A .
What questions would you have to dive into before making a purchase like this???
Real Estate Investor · Macedon, NY · Member since 2016 · 251 posts · 290 votes
9y
Seems awfully cheap for a rehab budget. I don't think I could do 5 full kitchens and baths for that, let alone all the other work it would take to split it into five units.
Rental Property Investor · Oconomowoc, WI · Member since 2016 · 996 posts · 431 votes
9y
Hi Rohan,
I currently own a Civil War home that was converted to a quad. The set-up worked fine for the bare bones we had. We made the dining room, parlor, and the servents quarters one 2 bdrm apartment. They smoking room and kitchen were turned into a one bedroom apartment. The master suite was made a one bedroom. And two bedrooms were combined to make a one bedroom. The hall and stairway are shared by all as well as the basement.
Here are somethings I have dealt with on mine:
Sealing baesment walls from moisture; jacking up original porch to keep it from pulling away from building and causing damage, jacking up floor supports that were sagging, and converting fuse boxes to breaker boxes; tenants installing window a/c units then damaging the window frames with water rot.
If it seems cramped for a 5-unit, what about making it a quad? Not sure what the lay out of the property is and if that would make sense. Then maybe you can have larger apartments?
What kind of siding does it have? Is it vinyl or wood? If its wood consider the maintenance required for painting. A paint job on the extrior can last (in WI) 10-15 years.
Look at the wiring as long as it is gutted. What kind of shape is it in? Is it up to code?
I would do it, but I would budget for getting utilities seperated (electric and gas). I would also make sure to put in individually controlled heat (furnaces, baseboard, etc). I have common utilties that are shared by two and those get expensive because you pay for lights and everything.
There is a lot to consider with any rehab, but these projects/ideas tend to be specific to older homes. If you have any more questions, let me know.
Los Angeles, CA · Member since 2015 · 176 posts · 48 votes
9y
Corina Eufinger wow, some great insights here. Great points about AC + mold
Thank you for the offer to help more - Im definitely curious on learning more on how I can make this work.
I'll follow up with you shortly in a PM. Thank you
Real Estate Investor · Macedon, NY · Member since 2016 · 251 posts · 290 votes
9y
Seems awfully cheap for a rehab budget. I don't think I could do 5 full kitchens and baths for that, let alone all the other work it would take to split it into five units.
Los Angeles, CA · Member since 2015 · 176 posts · 48 votes
9y
Paul Bowers apologies, as I may have miscommunicated on my first post.
The property was converted from a single family to a 5-plex (4 1beds, 1 2bed) over a decade ago.
I am now contemplating whether to rehab the 5-unit or not. I just wanted to mention that it originally was a single family because I felt it was relevant to the discussion.
I'm hesitant because it still looks and feels about like a single family (no separate utilities, neighborhood / limited parking, etcs). I was just curious on what the community would ask when purchasing a commercial property that had been converted a while ago. I'm definitely going to ask more about the mold / AC thanks to Corina Eufinger :)
I would not even consider buying unless 100% of utilities could be separated. Unless all utilities are put in individual tenants names the risk is too high.
Landlord must not have any, heat, gas, electric, water in their name.
Rental Property Investor · Overland Park, KS · Member since 2016 · 205 posts · 85 votes
9y
@Rohan J. that sounds a bit messy, to be honest. What is the total square footage? With it being gutted, you can ballpark estimate around $20 per sq ft for the renovations at rental grade. That does not include separate meters, and those can be quite costly.
Deals are everywhere in KC. I'd be happy to grab coffee/lunch sometime to chat about some options and ways to target those deals.
I would contact the city to double check the zoning. I know KCMO, for instance, can be pretty picky on issuing special use permits for multi-family units. Often SFR in residential neighborhoods needs special use permits to be used as multi-family in those neighborhoods. Even if the zoning is R 2.5.
Los Angeles, CA · Member since 2015 · 176 posts · 48 votes
9y
@Matt Pritchard Thanks for the info man. Very helpful. I'm in Kansas City for the next month or so trying to find rentals, so lets definitely grab lunch. I'll PM you info.
Los Angeles, CA · Member since 2015 · 176 posts · 48 votes
9y
As a follow-up to everyone on this thread, I wanted to say thank you to all. I will not be purchasing this property without a much much more in-depth analysis... it's not as much as a slam dunk as I thought! :(
Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
9y
@Rohan J. the deal breaker for me (and it's a big one) is that the utilities are not metered separately. You never want to be in that situation. Paying for 5 tenants utilities is just asking for trouble. Blue Springs is a good area but this sounds like the wrong deal to me.