Updated about 8 years ago on . Most recent reply
Deal analysis - 5 unit $670k C class in Carolina Beach, NC
Only have experience with Single family and would really appreciate anyone who can share their input!
Build in 1983, 5 unit 2nd row from the beach rented on a long term basis.
Rents - 3br $1250, 2br $850, 1br $750, $675, $675
Utilities are included and total $3800/year, not sure if possible to meter separately, but would definitely need to be charged back to the tenants if possible.
* Taxes $3750
* Flood insurance $1000
* Wind & Hail $2,000
* Home owner insurance $500
Owner financing is offered with $240,000 down, 3% fixed over 30 years with a ballon payment after 5 years. listing has been active for over 2 years with original price of $750,000.
| 5% Vacancy | |||||
|---|---|---|---|---|---|
| NET OPERATING INCOME | $37,222 | ||||
| Cash on Cash Return | 6.40% | ||||
| Gross Rent Multiplier | 13.30 | ||||
| Debt Service Coverage | 1.71 | ||||
| Operating Expense Ratio | 23.07% | ||||
| Acquisition Cap Rate | 5.54% | ||||
| Breakeven Occupancy | 65.31% |
Rent hasn't increased in years on most units and should be able to move up 100-150$ higher per unit as well as having them cover utilities.
The agent is making it clear that price/down payment is negotiable. Briefly walked the outside of the place and it clearly has some deferred maintenance. I plan on getting a GC to walk through and get some estimates on how much maintenance will cost with the current conditions.
If I rent went up and utilities charged back then the numbers would look like this -
| 5% Vacancy | |||||
|---|---|---|---|---|---|
| NET OPERATING INCOME | $44,062 | ||||
| Cash on Cash Return | 9.22% | ||||
| Gross Rent Multiplier | 11.64 | ||||
| Debt Service Coverage | 2.03 | ||||
| Operating Expense Ratio | 20.21% | ||||
| Acquisition Cap Rate | 6.56% | ||||
| Breakeven Occupancy | 57.15% | |
I would expect to lower the asking price by at least the amount of deferred maintenance, but this has been on the market for over 2 years with low inventory in the area, so I can't tell with what numbers this would be a good deal.
If you can share your thoughts I would greatly appreciate it!
Most Popular Reply
In my opinion there isnt much upside of going with seller financing with this much money down. If you can get to be a less than 20 % down option then you can go SF route....Otherwise, go to a bank. Just my two cents...Also, I have a lot of property in flood areas and costal, huge variables, your numbers seem light there. Call and get your own quotes, typically those quotes may come from seller and on turn over they go through the roof or might not be able to even be financed.