8 Unit deal - Buy or no buy?
So for the last 18 months I have been looking at the same piece of property, ill try and bullet the chain of events:
- - Property comes up for sale ( Boston area ) listed at 1.8 million
- - Total rent roll is 10,600 - 5 one beds, all under market value by about 250-400 ea minimum; 3 2 beds, also under market by about 300-400 ea. These are CONSERVATIVE market rents, as I have bed apartments personally im renting for 2100-200, and these are currently at 1550 ea.
- - Only one heating system, so the bill is insane, almost 8-10k a year
- - water very expensive, not sub metered and a pain to do, tenants won't pay for it anyway, at 8500 / yr
- - Flood zone, needs flood insurance & crazy other insurance, totaling about 10k-11k a year
- - Deferred maintenance - needs roof, deck work, landscaping and some interior work.
- - No one buys it, it sits, they price drop to 1.6, now they want 1.4, but it is no longer on the market.
So back when it was on the market, I offered 1.1 , essentially, a bank won't finance this ( in my market I have a 80% LTV lender ) and they want 1.2 DSCR, but this will not cover with their underwriting #'s... 5% prop mgmt, 5% reserves, 5% vacancy, and the info I listed above, and it doesn't cover because the rents stink. All BTW, mostly section 8.
They keep calling me to re-make an offer, but won't take less than 1.4 - im told, and I have not remade my offer. About every 5 months I re-do my analysis and look at how much of a cash cow this could be if you do the work to the property ( light work ) get out some of the cheaper tenants so you can appeal & raise rents thru housing, and get the rent roll to where it should be, add coin op, decrease regular costs and so on. We have the money lined up & ready to go, but I keep looking at it, and can't pull the trigger.
Last point, if you moved this same piece of property 2 miles down the road its prob double the value, and, if you fix the rents, you can force some serious appreciation, around 500-600k.
What would you do?