I am looking at a building about an hour outside of Albany New York. It's in a small town of 8,000. Although the list price of the property is $79k, it is currently fully occupied and brings in $2,200 gross rent/month. It is in great condition and wouldn't require any initial repairs. After accounting for all expenses including a management company, it looks like it cashflows around $600/month. There is also a very large garage in the back that potentially could be rented out.
While the town has low income, it is safe and has a very low crime rate. I do not foresee the property appreciating in value in the future, only keeping with inflation.
Is there anything I am missing here, or is this a good deal? I look forward to hearing everyone's thoughts.
If what you're saying is true, then as long as you know there is enough interest in the area to have it constantly rented out and there are no monumental problems with the property then it seems like a pretty good deal.
My only concern is if this is an on market property then those numbers seem high that would indicate it either needs work or is in a bad neighborhood. If it's an off market then who knows. Just make sure to verify everything. Liens/tenant info/structural integrity, etc.
Real Estate Agent · Albany, NY · Member since 2017 · 55 posts · 21 votes
6y
Small towns in the areas around Albany, generally have a very limited amount of multifamily. That makes for a higher demand especially if housing in the area is very expensive. I live outside Albany in a town of way less than 8000 and there is very little multifamily housing even duplexes. There is still a good rental demand because the school is very good and families want to be here but may not have enough saved up for a home. The sale price of 80K without knowing more details leads me to believe the property may need some work but without more details I can not say for sure. Best of luck and let me know if I can be of any more assistance.
Real Estate Agent · Albany, NY · Member since 2017 · 309 posts · 149 votes
6y
@Jack Lupica I think the main thing I would add to your analysis is making sure you are accounting for at lease a month of vacancy every year. Also, I would confirm that the rents are accurate and they have leases or previous rental history that supports 1100 per month per unit. Numbers wise it looks like a great deal. I'd also look at comps in the area go see if that is a typical price. If it's not then maybe there's something about that property that could cause an issue. If all those things check out don't hesitate, take action and go for it!
Hi @Nate Monson, the cash flow I posted accounts for a 5% vacancy. Also I see i forgot to add that its a triplex, so each unit brings in around 700/month. 2 of the units have tenants who have lived there for at least three years, which is why I put the vacancy a little lower.
Hi @David Kiszka, thank you for the perspective. I have only seen exterior pictures of the building as of now, although I am touring it next weekend. The exterior looks very well maintained. The realtor has told me that the interior is also in good shape, just with dated cabinetry and appliances. Given the area though, Im not sure if remodeling the units will really provide much upside in rent as there is a hard upper limit in the area.
Real Estate Agent · Albany, NY · Member since 2017 · 309 posts · 149 votes
6y
@Jack Lupica I gotcha, I guess my reasoning for that is property is smaller areas naturally have less demand. But on the flip side if there aren't many rentals or multi family properties you could be fine. And the triplex will also mitigate your vacancy risk as well. Seems like there is good rental history as well. With those numbers I wouldn't hesitate trying to get it under contract and then use your due diligence period to get more detail about the condition.
Cincinnati, OH · Member since 2013 · 1k+ posts · 1k+ votes
6y
If you're financing the deal, at 25% down, your annual returns result in a 36% CoC (cash on cash). It also shows a 3 GRM (gross rent multiplier) which is very low and would typically suggest a D/F area. Sounds like you know the area and as a small town, there just isn't strong demand from buyers. Ensure the rental demand is there and you are comfortable holding the property long-term.
What are some of your potential exit strategies? If you wanted to cash out at some point or if the rental market in the area suddenly plummeted, what would you do? If you did upgrade the appliances eventually, do you think that could at least increase the value enough to cover the closing costs for selling?
Also, is the property ancient and going to require frequent repairs? Upstate NY can be a bit old sometimes.
I'm just playing devil's advocate with the questions. I've been looking in the greater Albany area for a little bit and it sounds like you have a pretty good deal on your hands. I'm a little jealous haha!