20 unit property, deal advice
10 Replies
AJ Angel
from San Clemente, California
posted about 3 years ago
Im going to be buying a 20 unit apartment property.
im doing seller financing with 15% down on a 395,000 price with a 6% interest
monthly rent total is $8,215 when fully occupied, 17/20 are rented
monthly expenses:
water-1100
landscaping- 200
taxes-226
insurance-70
future property management -600-700
seller payment- 2400
total is 2500-3500 (set aside 25% for repairs and vacancy of that. total)
cash flow around 1800-2600
the property is real low maintenance, no washer/dryers, building is cinder blocks with concrete flooring,
there is more story to the property but this is just a rough snap shot of it.
good deal or no deal? thank you
Wilson Lee
from Birmingham, AL
replied about 3 years ago
We have some missing experiences. What is the annual vacancy cost? What deferred maintenance is there? Do you have an exact maintenance scheduled? Roof, appliances, AC units, furnaces etc.
based on the info you provided you at a 15% cap rate. It is profitable and fare. But that is assuming you are not replacing AC units and Water heaters left and right for the next few years. What your markets going cap rate?
As far as value add, can you get the water sub metered?
If you fill the units and cut that water bill you could add a lot of value to the property. Crunch the numbers, You may be able to do a refi and get some of your 15% down payment back.
James Wise
Real Estate Broker from Cleveland, OH
replied about 3 years ago
Originally posted by @AJ Angel :Im going to be buying a 20 unit apartment property.
im doing seller financing with 15% down on a 395,000 price with a 6% interest
monthly rent total is $8,215 when fully occupied, 17/20 are rented
monthly expenses:
water-1100
landscaping- 200
taxes-226
insurance-70
future property management -600-700
seller payment- 2400
total is 2500-3500 (set aside 25% for repairs and vacancy of that. total)
cash flow around 1800-2600
the property is real low maintenance, no washer/dryers, building is cinder blocks with concrete flooring,
there is more story to the property but this is just a rough snap shot of it.
good deal or no deal? thank you
The price per unit & the fact that the seller will carry the whole thing tells me that 1 of 2 things are happening here.
- This is the greatest deal of all time. You should not be talking because you should be busy signing papers.
- The property is in the hardcore ghetto & the seller just wants to dump it. He wants to dump it not because he needs cash, but because it's a horribly difficult property to manage. This is evidenced by the fact that he is willing to carry with such a low down payment. If he just needed cash he wouldn't carry it.
With those 2 things in mind your entire analysis is missing the ball. You are running through the numbers then asking questions. Bro those are the greatest numbers ever, your financing is insanely good. That's not the issue. The issue is can you actually collect & manage this tenant base?
AJ Angel
from San Clemente, California
replied about 3 years ago
Wilson,
Roof was done late 90s and there is no ac units. its a real low maintenance property
James,
its not in the ghetto, it is in the lower to low mid class area. the seller has done great with the property and its a cash cow for him because he owns it out right. he is retiring and selling property and moving out of state. i working on getting the rest of the down payment now. do you want to help or know a private money lender that wont charge me a horrible rate.
James Wise
Real Estate Broker from Cleveland, OH
replied about 3 years ago
Originally posted by @AJ Angel :
Wilson,
Roof was done late 90s and there is no ac units. its a real low maintenance property
James,
its not in the ghetto, it is in the lower to low mid class area. the seller has done great with the property and its a cash cow for him because he owns it out right. he is retiring and selling property and moving out of state. i working on getting the rest of the down payment now. do you want to help or know a private money lender that wont charge me a horrible rate.
I think your foolin yourself on this one.
Nicholas Scatton
from Lansdale, Pennsylvania
replied about 3 years ago
Andrew Johnson
Real Estate Investor from Encinitas, California
replied about 3 years ago
@AJ Angel Have you visited the property in person? If you haven’t, but a plane ticket. The numbers on this one are in the “too good to be true” category. There’s no reason that if everything isn’t as stated the owner couldn’t list for more and sell to a cash-buyer conventionally.
I’ll be overly general and say:
1.) $20K per unit = Pain
2.) $400/month rent = Pain
Now if you’ve owned properties like that before, have managed them, understand them, you can likely find success there. Would I even suggest that a person do this for their first (presumably out of state) deal? Not a chance...
Then again, I could be all wrong 🤷🏻♂️
James Wise
Real Estate Broker from Cleveland, OH
replied about 3 years ago
Originally posted by @Andrew Johnson :
AJ Angel Have you visited the property in person? If you haven’t, but a plane ticket. The numbers on this one are in the “too good to be true” category. There’s no reason that if everything isn’t as stated the owner couldn’t list for more and sell to a cash-buyer conventionally.
I’ll be overly general and say:
1.) $20K per unit = Pain
2.) $400/month rent = PainNow if you’ve owned properties like that before, have managed them, understand them, you can likely find success there. Would I even suggest that a person do this for their first (presumably out of state) deal? Not a chance...
Then again, I could be all wrong 🤷🏻♂️
Overly generalized, yes. Completely accurate, also yes.
👍
This is the most important factor in analyzing this property. All the other stuff is spreadsheet numbers. Spreadsheets don't rent properties, tenants do. & tenants don't read your spreadsheets.
Andrew A.
from Cleveland, Ohio
replied about 3 years ago
And their's no washer dryer in the facility? That speaks to the tenant pool.
Wilson Lee
from Birmingham, AL
replied about 3 years ago
I have a building with no washer and dryer. The only people who rent there do so because they are on there last leg and need a roof over them. They are very hard to deal with. They have no safety net so every little upset in their life can cause a unit to turn over.
With that said it cash flows exceedingly well. But it takes up a lot of time too.
Jill F.
Investor from Akron, Ohio
replied about 3 years ago
That's REALLY cheap for 20 units