8-unit building, buy it or walk away? What would be a good price?

Question

I'm looking at an 8-unit building and need help determining what price would make this a good deal. I will be glad to find out and add any information needed to help. Thanks!

Asking Price is 556k Appraised Value "Sales comparison approach" 598k Built in 2004

Decent location in the middle of town

All units currently rented "Units leased are 1 year leases"

Unit A Leased Dec 2018 $775

Unit B Leased Sept 1 2018 $700

Unit C Leased Nov 2018 $900

Unit D Same renter for 3 years, month to month current rent $850, they are upping the rent to $900 in Feb 2019

Unit E Leased Oct 2018 $900

Unit F same renter for 2 years, month to month current rent $850, they are upping the rent to $900 in Feb 2019

Unit G Leased in April 7 2018- March 31, 2019 $700

Unit H same renter for 3 years, month to month current rent $675, they are upping rent to $725 in Feb 2019

Total current income = $6,350 After rent increase next month income will be $6500

Expenses

- Tax $817

- Est. Insurance $709

- Garbage $225

- Lawn $150

- Utilities Tenant pays

I have not had the place inspected, but I've seen pictures and figure around 15k in initial repairs. The roof will need to be replaced within 6 years, and assuming a few other things as well. What is the best way to conclude an offer price? How much should I figure in for cap x and repairs is a big one for me. What's a good price per unit to set aside assuming everything's in good condition when you buy it and you can do the repairs yourself?

Walk away or make it happen? Thanks for any support!

Account Closed · Answer

Thanks for your reply @Alexander Flores. I suppose if I can get it for the right price I can re-finance in a year and use that money for any repairs needed.

Alexander Flores · Answer

If my math is correct your NOI for the first year, with your 15k in repairs would be $38,388. That would give you a 7% cap rate given you buy it at asking price.

Without the 15k in repairs, your cap rate would be around 10% which is great depending on your area.

Monthly Income = $6350

Monthly Expenses = $1,901

Monthly NOI = $4449

Yearly NOI = $53,388

For repairs and cap x, the amount you should figure is the amount that you need to repair the property. No one can really answer this without seeing the property. Get an inspector in there and figure this out.

When deciding on the offer price, numbers don't lie. Investing is numbers game and calculations, in my opinion, are the main factor when I decide on a purchase price.

I only have single families but hope my advice helps. Anyone who can correct anything I said would be appreciated!

8-unit building, buy it or walk away? What would be a good price?

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