Am I stupid for considering this multi?

Question

Looking at one of the only multi fam available in my small community and need a sanity check: 12 units all 1/1's built in 1965 and haven't been touched since

Current net $20,100(brokers #'s) List price $395k, yep under 5% cap rate! look it up on loopnet in maryville

This property defines "deferred maintenance" and needs every bathroom, fixture, cabinet, door, window, floor, appliance, septic systems, supply plumbing,(currently galvanized) hvac systems,water heaters etc replaced, plus all the cosmetics.

rehab would easily be over $200k , but the 50 year old septic systems might last a little longer!

At an 8% cap rate all fixed up and end of the rainbow rents it would be worth around $550k assuming 50% expenses.

Kinda like doing all the rehab work and giving your first years cashflow to the current owner, cause i would be in it for say, $575k

I suspect in a normal world this would be a joke. So is this where we are in real estate? would you consider this in your town? They already said no to $350k

Sam LLoyd · Answer

I would need a bit more information.  Start with potential gross income using market rents.  Another piece that would determine weather this is doable is where your money is coming from.   Another couple things that would be helpful is knowing what the the permitting and licensing would cost to do the repairs and what the demand is for 1/1s in your area.

Will G. · Answer

@Sam LLoyd added more info in repost above

@Jay Helms I meant you can look it up with financials on loopnet, and owner already turned down $350k

Will G. · Answer

current gross is $38k, potential gross is $86k, no financing involved, until completion of rehab. Permitting around here is reasonable and included in $200k rehab estimate. Demand is strong, but outside city limits in a residential neighborhood

Jay Helms · Answer

@Will Grabert - you lost me in paragraph 2 when you said Loopnet. But if you’re still considering, make an offer where the #s work for you and your investing criteria (due diligence pending obviously).