Found a 5-Plex

[Timothy Marr]

I recently came across this 5-plex for sale. Each residence is a one-bedroom, one-bath unit, approximately 700 square feet in size. Right now, the location has been gutted down to the studs by the previous owner. He started the renovation process but has decided to sell. The asking price is $199,900, and I estimate the rehabilitation cost will be around $150,000 to $175,000. Based on comparable sales, the ARV is expected to be around $450,000 to $475,000. Monthly rent, once occupied, should total around $4,500 to $5,000. I'm trying to figure out if this is a good deal. This is my first time dealing with a multi-family property. Any help will be greatly appreciated.

[Greg Kasmer]

@Timothy Marr - Based on the data you shared above, I think this definitely has potential. However, I would run a model/analysis once the building is stabilized to completely understand if it will cash flow under normal revenue and expense assumptions. If you have $4,500-$5,000 in revenue coming in, you'll need to assume vacancy (5%), repairs and maintenance (7%), taxes, common utilities, lawn/snow removal expense, management fee (7-10%), insurance (maybe $500-$900 per unit per year) as well as your loan payment on a $350-$375k loan. If you can cash flow in that scenario, then I think it's a deal worth pursuing. Also, the rehab budget of $150k for 7 units seems very low to me.... I would anticipate about $30k per unit or between $200-$250k total, BUT I'm not familiar with labor/construction costs in this area. Good Luck!