I just put a very well maintained 4plex under contract for 91k. It is fully rented and is in turn key condition. Now, the current owner hasn't raised rents in about 10-15 years, and they're about 90ish dollars below market avg. It has original windows (the aluminum framed ones from the 50s), no dishwashers, and no ACs. My plan is to roll the purchase of new windows into my loan, so, 20ish windows, at 150 a piece is about an extra 3k right off the bat. Then I would add dishwashers and AC units as I turned over the actual units. The amv of the property is around 130-140. Is this a good investment or should I put this off. On a side note, I'll be living in a unit.
With little info you have given it sounds like a decent deal, especially if you are going to be living in it. Are you going to get owner occupied financing on it? You will want to run the actual cash flow numbers though to get a better idea of how good the deal is. Taxes, insurance, utilities, snow removal, etc, that will give us more information to help you determine how good of a deal it is.
Oh yeah, I'll be getting an FHA loan, and the numbers look good on my calculations/itll have positive cash flow. More as I bring the rents up towards market value. My question was more of a should I roll the purchase of new windows into a 203k loan or should I hold off on those kind of improvements until I've owned it for a year. For example, I'm going to add AC units and dishwashers as I turn over each unit, but I didn't know if new windows should be a now or later kind of purchase.
I would wrap the window improvement in with the loan. Be sure to add them as a component to your depreciation schedule.
Yes,more information is needed but based on what you have given us here are some comments. Is the rent under market in the current condition or after improvements? Raising the rent should add $30,000 to $40,000 to the value.
Are you going to do your own improvements? I do the calculations as if I will not do any of the work.
As a flip I would not do unless I could get $140,000 +. Whether it is a good buy and hold depends on current financials and the value you bring.
Awesome, thanks for the feedback! To answer the questions, the rents are currently under market for the current condition of the property. Even without the planned upgrades (ACs and dishwashers) other similar units are renting for at least 450. I don't think raising rent and the other improvements will raise the value that much because it's a 4plex, it's based on sales comps, not on rents and improvements.
I'll be installing the dishwashers, as I've done that before, but I've never replaced windows, so that'll be done by someone else.
The way I figure it, If I can keep all of these added things to under 100k, the property will easily appraise in the 130s or higher. Which will allow me to refinance and roll that into another property. I just wasn't sure if adding things like windows was a good idea at the start and wanted the opinion of other landlords.
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