Seems like a deal, right? Need a nudge
I am new to multi-family investing. Since finding Bigger Pockets earlier this year, I've been focused on learning more about analyzing property. I started out with looking at single family but after listening to the podcasts and reading more, I decided I needed to enter the game at a higher level in order to get where I want to be. My W-2 job is engineering and I own a small real estate brokerage that focuses on residential. Commercial is very new to me.
I was having breakfast with a friend of mine recently and I was telling him about my interest in multi-family and asked if he knew much about them, he didn't. However, he did have a client recently pass away and his 70 something widow was looking to sell two 9 unit buildings (without a broker) that they have owned since they were built in 1984. He asked if I want him to ask about them.
Long story short, I have had a meeting with the current owner and her two sons. She prefers to be completely out of the apartments, but is warm to the idea of owner financing. I have ran these building several different ways and have settled in on making two offers.
Basics:
Scheduled Rent: $151,600
Garage Income: $1,800
Laundry: $3,600
Effective Gross Income (assuming 10% vacancy): $141,840
Taxes: $20,800
Insurance: $8,000
Electric: $1,436
Water/Sewer: $6,073
Gas: $600
Trash: $2,700
Lawn/Snow Removal: $3,360
Capex/Maintenance (15%): $21,300 (Probably high since most of capex items are less than 7 years old)
Total Expenses: $64,300
Net Operating Income: $77,540
Am I missing any other expenses else besides PI payment?
Asking price is around $1million. Without broker fee and some negotiations, I hope to settle with one of these two offers:
Offer 1:
$950,000
Owner Financing: 10% down, 5% interest, 30 year amortization and 5 year balloon.
Year PI: $55,080
Income: $22,460
Offer 2:
$900,000
Bank Financing: 25% down, 5% interest, 25 year amortization.
Yearly PI: $47,352
Income: $30,200
Strong job and rent market. Occupancy can be reduced to 5% with some cosmetic improvements to freshen up the apartments. I plan on reinvesting the capex budget of $22.5k/year back into the units for the first 5 years. Rents can be increased from the $700 average to $750 average based on product in the market. The older couple that owns them hasn't done much true management to the buildings to keep them running like a business.
I know I am new to this, but this seems like a good deal right?
A little nervous to make the big leap financially, but the time is right. I lost a lot of confidence about 12 years ago due to losing two children and still working to get it back. Any and all input/encouragement would be greatly appreciated. Thanks.