Good Deal or Not - 4plex built in 1935?

Question

1935 4 plex that I want to Buy and Hold.  Has a foundation issue but is fixable. Offered $750K but found out possible Repair costs could be $90-$100K to completely repair with the foundation being the most expensive($27K). Comps in the area are $550K - $1mil. There are a lot of houses being torn down and new construction thats driving the comps to $1mil. Total Rents $5585. I'm able to secure a conventional loan with 25% down and 30 yr mortgage. I recently started negotiations to bring the offer to $695K due to the condition. I think I'm needing a mold and termite inspection. Last tax value was $900K in 2019, but I truly believe its more like $695K which it was tax appraised in 2018. I'm not sure why the value tax appraisal increased so drastically when no updates or repairs had been made. So taxes went from $16,000 yr to $21,000. Good Deal or pass?

Renee Moomey · Answer

@Ivy Ford-Crafton what is your investment background? How is your team, as a team would be needed for this. What are some other comps? Seems too risky at this point. I'd pass going off just this information.

David Avery · Answer

Sounds over priced to me.  Age, and condition your seeing all ready would scare me and I am a contractor!

Are said Units all 2 bedrooms or larger?  Hopefully you have some great Square footage to work with.

Your inspection report could really be ugly and cost you $1000.

I would pass on information you have provided!

Heath Ryans · Answer

@Ivy Ford-Crafton

I would take a closer look at your comps to see what is actually a true comp. There's no way similar properties in similar areas have a half million dollar spread between them. Look at similar age, location, and construction. If they're aren't many similar, you can stretch that a little but don't hold an 85 year old building to a 2019 build's valuation.

Unless that property has been gutted and renovated a couple times over the years, there's likely a lot of issues that conventional lending and insurance won't accept and will require you to fix within the first year of ownership.

I think you need to be under 500k if your comps start around that price and you need a minimum of 100k in repairs.

Tax assessments are mostly computer generated. It's based on zoning, use, sq ft and largely driven by sales data. Every few years the assessor may do a drive by of a property, but it's likely not a frequent occurrence, especially in larger counties/cities. The tax assessment is worth about as much as the paper it comes on as it relates to true valuation.

Alex Olson · Answer

@Ivy Ford-Crafton Have you purchased investment real estate before? This seems like a large project for a first time investor. But, if you have completed a project similar to this size, then I would say consider it. It would be worth brining an agent into the situation that knows the area and the market of what is selling and how well. Also, a bank may be able to help you determine funding for it.