I noticed this property back in October when I was exploring properties in my area and it kind of de-motivated me because it seemed like such a great deal I couldn't afford. 4 unit in Montgomery, AL listed for $166K, fully rented (according to the description) bringing in $2350/month so over that 1% rule for rent and would bring in over $1500 a month. Since then, the listing price has dropped to $129,900. And it's been listed for almost a year. Now it is closer to the 2% rule which does call for some skepticism. Good schools available for middle and elementary. Crime levels are not the best but they are comparable to places I have lived in with no problems.
Can anyone review this property and provide some insight on why this place might not have sold yet?
345 Arthur St
Montgomery, AL 36107
@Rich Carey, I heard you on the podcast and I know you invest in Montgomery. If you are available, can you check it out and provide your perspective? Thank you.
@J.S. B. I've built my own financial model that I help other investors with and I can do a quick analysis on this deal if you could provide the following expensese: insurance, taxes and if there are any outstanding capex items that need to be addressed.
@Curtis Rouse I don't have any additional information besides what I was about to find on the Trulia listing I linked to in the post. But according to that it, looks like the insurance would be $75/mo and taxes would be $42/mo. Also, I don't know what "outstanding capex items" would be.
First thing I’d do is actually go look at it . Then if it’s not a dump start investigating the taxes utilities expenses insurance
@J.S. B. Yeah I don't trust those websites for actual information, but for the time being I will go ahead and plug those in. I'm guessing you haven't seen the property and with it being an older property built in the 1920's, I'll just assume a higher percentage for capex. I'm guessing the current rents per unit are $590 with the $2350 gross rents correct.
@Dennis M. and @Curtis Rouse so you think people may have passed on it because when they looked into it they found high taxes, utilities, expenses, or insurance? The pictures they posted make it seem like the house is in pretty good condition. And the notes say it was recently renovated. I'm not in the area now but I did find it interesting.
@J.S. B. Here is a quick financial analysis on this deal. Long story short, it looks like a good deal "IF" all the units are occupied and there isn't as much deferred maintenance as what I show. If at any point in time there are only 3 out of 4 units occupied, then this would be a negative yielding property in which you would have to pay each month (last chart). This is the problem with smaller deals like this because you don't have enough scale like apartments that I invest in. Me personally, I look for at minimum a 10% COC return, so anything below this is a bad deal and not worth my time. Let me know what questions you may have.
Closing Cost: 5%
Amortization: 20 yrs
Int Rate: 5.0%
Capex: 15% (older property assumption)