3 multi family property deal
Investor · Denver, CO · Member since 2013 · 38 posts · 4 votes
I'm a first time RE investor, looking for my first deal. While looking into one multi family property, the seller said all three of his properties were for sale for $225,000 (17 units). These properties are on the cusp of a sketchy neighborhood and fast moving development which could drive rent/property values up. From doing calculations, these properties cash flow about $2300 a month with room for quite a bump up in rents and I believe I can lower the expenses substantially as well. I'm going to walk through all three properties tomorrow, are there anything I should consider in the larger scheme of this deal or anything I should keep an eye out while doing the walk through or questions I should ask?
Unfortunately I have no experience here, but I am curious to know how you found this deal...sounds pretty good. I am very interested in the responses you get. Best of luck!
@Account Closed
Some words of caution -- the deal might be smoking hot, but 17 units and the proximity to a "sketchy" part of town are all warning signs for a first-time investor. Dangerous areas bring a lot of uncertainty to any project. Taking on that many units at your first go could be surprisingly overwhelming. As a first time investor I'd hope you have an experienced team ready to go should you move forward.
Since it's a transitional area, and by the number of doors and the price you've listed, I'd expect that there's good potential for some upcoming capital expenditures, so ask about big ticket items like the roof, electrical work, plumbing, HVAC system(s), and so on, along with any other maintenance items. If you're familiar with local building codes you might be able to tell if the property has been worked on by licensed professionals or the owner on the cheap, depending on the quality of work you'll see.
You'll also want to know about crime on and near the property, and you'll want to shake other branches to be sure you're getting a clear picture there. This is important for the obvious reason that no one likes having their properties under rehab robbed.
I'm guessing your numbers are based on figures that might have been cooked, partially cooked or at least defrosted by their accountant to stir interest. Expect your analysis to change as you get more information.
In general: be curious about everything in this process and ask lots of questions. You'll probably get some surprising answers. You're starting out so your goal is to learn, learn, learn, and that's not done exclusively with contracts and down payments (although that's the most exciting method).
Best of luck!
@Account Closed
Some words of caution -- the deal might be smoking hot, but 17 units and the proximity to a "sketchy" part of town are all warning signs for a first-time investor. Dangerous areas bring a lot of uncertainty to any project. Taking on that many units at your first go could be surprisingly overwhelming. As a first time investor I'd hope you have an experienced team ready to go should you move forward.
Since it's a transitional area, and by the number of doors and the price you've listed, I'd expect that there's good potential for some upcoming capital expenditures, so ask about big ticket items like the roof, electrical work, plumbing, HVAC system(s), and so on, along with any other maintenance items. If you're familiar with local building codes you might be able to tell if the property has been worked on by licensed professionals or the owner on the cheap, depending on the quality of work you'll see.
You'll also want to know about crime on and near the property, and you'll want to shake other branches to be sure you're getting a clear picture there. This is important for the obvious reason that no one likes having their properties under rehab robbed.
I'm guessing your numbers are based on figures that might have been cooked, partially cooked or at least defrosted by their accountant to stir interest. Expect your analysis to change as you get more information.
In general: be curious about everything in this process and ask lots of questions. You'll probably get some surprising answers. You're starting out so your goal is to learn, learn, learn, and that's not done exclusively with contracts and down payments (although that's the most exciting method).
Best of luck!
Thanks for the advice! Since this is my first deal, I'm definitely approaching everything with caution, I'll write those questions down and also hope that my agent has a few of his own. The property has been on and off the market since Aug of '14, my agent believes that the seller may be eager to get rid of the properties and we can get it at an even lower price. The revenue and expenses I used were from pro forma's they provided by the sellers agent, the more digging I do the more I know if those are accurate. On a broad overview, this looks like a steal but obviously, if it looks like a steal proceed with caution because there's bound to be something. The rest of the block is pretty quiet, I'd say 95% of the block is other multi family properties, most of them owned by a Christian organization, I toured one of their properties that is right next to all 3 of these properties, all seemed nice and liked to keep to themselves. Their property manager lives across the street and keeps an eye on all of those properties, he also mentions that there are various neighborhood groups that help to watch the neighborhood.
one of the main things to keep an eye out for is neglect. Damaged parts of the property, curb appeal, look for water stains or running water it can signal a big issue. Also trash any trash around the property can be a clear sign of neglect.