10 unit, 1bd/1bath studios.
Rents @600 each.
Asking 150k but the caveat is the owner pays all utilities.
What are your thoughts on this scenario for a first deal?
Not enough information.
- Demographics (employment, median income)
- Current and projected expenses
- Immediate capex
- Potential for rent growth
Need more information but my first thought is that the price is crazy low. Obviously it depends on the location but I can't think of a city in the US where you'd be able to get that kind of price and the building not be completely dilapidated.
Would definitely like to hear more though.
@Matthew Grabarczyk that seems like the deal of the century as you are talking about a 4% rule, so utilities or not, you are cash flowing. Now, what is the rest of the story on the property? Is it in a rough neighborhood, is it mostly vacant, is it in a state of disrepair? Maybe after repairs and repositioning you would be closer to 2%. I am only guessing without all the info.
In regards to the utilities, what is common in the market? Are utility bill-backs common, or do all the comps pay tenant utilities? If you are truly somewhere between 2 and 4% though, it may not matter.
Thanks for the replies everyone.
it is in the midwest(Ohio)
Single family houses in the area go for 50k with rents around 700/month
Average income in the city is around 35k
It's definitely dated, needs paint, carpet, fixtures, was built in the 60s
sewers and utilities recently updated
Current owner says it's easy keep fully rented out as a lot of contractors get on long term refinery projects nearby
@Matthew Grabarczyk If this is a good deal for your standards, why not put in an offer with contingencies (inspection, appraisal) then get a look at the rent roll, and the “schedule E” I believe, to see what the current owner is claiming on taxes. Talk to a few people in the immediate area, call the nearest businesses and get their take, compare it to similar buildings. Call and get a quote for insurance. Have the owner show you the utility bills. You have to do your due diligence to ease your concerns. Nothing is a guarantee, but for your first deal, if all looks good to you, go for it. I’m still looking to land my first property.
@Matthew Grabarczyk sounds like it needs a couple hundred on renovations
@Matthew Grabarczyk definitely factor in costs to add separate water and electric meters. One cold weather spike could send your electric bill into the multiple thousands of dollars similar to residents during the storm in Texas. One water leak could cause you thousands of dollars that you’re in the hook to pay.