Deal Analysis Help or Ideas on a Multifamily Building

6 Replies

Can you guys help me determine if this is a decent deal? I'm looking to take advantage of bonus depreciation and thought this could be a good deal. I also like it because the owner is willing to do seller financing and I don't know another way to go about getting financing since I do not have two years of income (albeit this year I have $250k thus far in commissions).

The owner is retiring and has no basis/seems like it may require some work, though I guess it's humming along for now. I plan on driving down there this weekend to take a look at it. He is looking for $585k, 30% down and 6% interest only for a 7 unit building (1 bedrooms) totaling appx 5200 SF on the University of South Carolina campus.

The units get anywhere from $800-$900 and would yield appx $5500/month in rental income.

The tax bill for this past year was appx $7400.

Any thoughts on whether or not that financing is crazy /ok, alternative financing routes, other ideas to accomplish my goals would be helpful. Let me know if any questions. Thank you.

If this is your first - bring in a partner. Better to give up some equity and learn the process than try alone. You can then use this experience to purchase others.

@Donald F.  Seller financing can be great option but in the current scenario, it limits the use of your finances. As @Mo Weis said above look to bring in a partner who has some experience, as well as the net worth and liquidity requirements needed for better financing.

As far as your desire to use bonus depreciation to offset your income, it can be a great strategy if used properly. But as I always say, don't do a deal just for the tax advantages, make sure it's a good deal on it's own.

I'm very much still learning RE investing so I'm sure there is a lot I'm missing here, but it sounds like a miss on the two the major rules for buy and hold properties

1% of 585k is 5,850, so at $5,500 it's well below the 2% rule

I calculated the mortgage on a 30 year at $3,137 so the 50% rule doesn't work for cashflow. This deal is under the 50% rule by about $380. 

I'm sure there are a lot of other factors to consider, so I'm interested to see what others have to say! Best of luck!

@Mo Weis I’ve noticed that it’s more of a 1% rule than 2%😂 

I did miss that it was going to be interest only, but I did calculate for the 30% down. 

If the interest only is 2050/month, then it’s about 700 Cashflow or $100 / door. That’s a lot better deal. Not sure I like the idea of an interest only loan though. Not building equity unless you refinance and never actually ‘owning’ the property ... maybe a tactic but it’s not for me

Your property taxes will go through the roof when you buy this property. Not knowing the address but assuming City of Columbia. Richland 1 is 17200/yr at this price and richland 2 is 21,000/yr