Ugly Property - Good Numbers
Hi BP!!!!! I'm a long time reader, first time poster and a podcast junkie. Looking for the collective wisdom of BP community to help me out.
I'm looking to do a 1031 on a condo that recently was vacated. I have good equity that I'm looking to roll over. On a side note, condos can be a great investment if the numbers make sense. They've worked out for me so far. I'm now looking to move to next step.
One of the properties I'm looking at is a 8 unit building. The property is 7x 1 unit and 1x 2 unit apartments with good bones (outside structure and base) and it is close jobs; big Fedex distribution center, airport and industrial park. The challenge is the apartments are quite small for the area and building is ugly (on a main street across from industry and a tree service company storage lot next to building. The building has parking but not ideal (gravel side lot that needs to be paved) and the 1-br units are quite small for area. The building is ugly, looks like overtime it has been hacked into 7 -1 bed units...legally.
I would say it is a C- building (not D cause in decent shape) in a B/B- neighborhood. The numbers make sense though. The asking price is around 480K, current rents are over $68K yearly (including laundry) and with some remodeling can raise rents to 73K a year. Expenses including utilities, bills, capex and vacancies come to $32K. That leave $36K for mortgage and reinvesting money.
These are my concerns:
1. Will I have a hard time renting the units? The current rents are $250/m under market for 1 bedroom. I can fix them up and bring them up at least $100/m which can help. I'm hoping this makes it easier.
2. What kind of tenants will I get? Am I getting problematic tenants?
3. The property has been on market for sometime. When it's time to move up am I going to struggle selling this building?
Thoughts...?