Should I do this deal?

[Natalie Kondratenko]

My realtor/property manager has a listing for a 4plex in a low-income area and has talked to the seller(s)...4 partners, about the idea of providing a second for the down payment. The bank I use will allow a second. Here is the terms of the deal:
100k purchase price
20k second at 6% amortized over 20yrs with the final balloon payment after 3 yrs.
Renal income is 1600 a month and the units are 2 bed room 2 bath 1000 sq ft apts.
Market rent is between 400 - 500 per unit in the area. My manager has 15 fourplexes that he manages in the subdivision out of about 60 blogs.

I'm concerned about the fact that it is a low income area with the usual problems - drugs, petty theft, domestic violence, etc but I don't feel uncomfortable when I go there and my manager says he is not uncomfortable day or night. There is a strong police presence there to keep the crime at bay.

The roof is about 7 years old, relatively new ac units in 3 of the units, 2 long term tenants, the other two within the past year. The building has been well maintained and the exterior was recently painted.

What else should I consider to make my decision?

[Joel Owens]

"My manager has 15 fourplexes that he manages in the subdivision out of about 60 blogs."

So your property manager/agent runs 25% of the total development int he complex. What kind of performance do those buildings have and how well do they run them??

What does the rent rolls for the past 2 years look like and have you verified bank deposits?? Given that they just did work to the building they might have given deals to tenants and stuffed them in there to sell.

Why are the partners selling?? When you have so many other buildings in the development you lose CONTROL of your investment. You can have the nicest property but if a potential tenant has to drive through run down buildings,vacant buildings,crime,drugs,etc. then they will not want to live in your building. The other owners will affect your resale and and ability to keep the tenants you currently have.

Have you looked at the crime report for the development?? Look at person of non-violent to violent crimes and the frequency and proximity to your building you are looking to purchase.What about the tenants in the building you want to buy? How long have they been there? How many times has eviction proceedings been brought against them ? Are they on time,slow pay,or no pay tenants or a mixture and what has been the frequency??

I am only scratching the surface here of what you need to consider.

What about the 60 unit building mix?? How many are owner occupied with an FHA loan,owned by an in town investor,bank owned,in distress (pre-foreclosure),estate owned,out of state investor?

How long has the owner mix owned the buildings on average?? Who owns the majority of the buildings and what are there plans for the whole area??

I can go on all night with this. I can tell you that I do not like deals like this.I prefer larger developments where I control the look and feel of the property and what goes on with it.