Should I jump on this deal?

Question

I found a 10 unit building 8 1bed/1bath and 2 2bed/1bath. in my local california area. They want 1.5million but it is completely empty! It’s great becuase I can get all new tenants in at market rent. But also scary because of holding cost while filling the building up with new tenants. During covid people can squat very easily in california.  The owner will do seller financing with 400k down at 4% interest only for 5 years...

the 1bedrooms can easily rent for 11-1200 and the 2bed for 15-1600

Any ideas about this deal will truly help. I currently own 1 duplex I got in 2018 (going great) and am flipping a manufactured home 100 yards from the ocean where people are paying 700sq ft for these manufactured homes... I have a little experience but not too much in being a landlord.

What is your take on multi family in california should I jump on it and lowbal 1.3?

Bjorn Ahlblad · Answer

Account Closed most properties in California are bought with the belief that property values will increase over time and most of the time that has been true; at least in the past. So generally the assets don't fully pay for themselves and will require some help in the form of cash from the owner. I had a quick stab at underwriting the property and it does not cash flow; so only take on this property if you have a boatload of cash available and if the seller is very flexible. On top of that depending on where LL tenant laws can be a disaster. I was a small time LL in Ca for 30 years.

I don't think 1.3 is necessarily a lowball. But I know nothing about the area and condition etc. Why is it empty?

Dylan Vargas · Answer

Account Closed Welcome! Its all about the numbers my friend. Run the rental calculator here in the tools area and see how it looks for you. Numbers do not lie! Taxes, Insurance, Maintenance, payment, renovation costs if any etc. Then see how that looks.  Its free to run the report. Good luck and keep us posted. Remember the taxes may rise substantially with a new owner.

Taylor L. · Answer

It would bring in around 12-13k a month so I am confused how it’s not cash positive.  The owner inherited the property and didn’t want to deal with it.  It’s in a ski town and there is no rentals available to the locals at the moment..

Could be a good opportunity, but you need to also get a handle on what the expenses would look like. What utilities is the owner on the hook for? Repairs & deferred maintenance? Property taxes? etc

Nadia O. · Answer

Account Closed hmmm california, ski town...where exactly are you looking to purchase? i know there's a huge over value in RE ski town but mostly for SFH...not multi-family. And generally those areas are overrun by STR.

Account Closed · Answer

It would bring in around 12-13k a month so I am confused how it’s not cash positive.  The owner inherited the property and didn’t want to deal with it.  It’s in a ski town and there is no rentals available to the locals at the moment..

Should I jump on this deal?

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