4-plex that comes with a lot of work..Should I purchase?

3 Replies

Hello All,

I am a want to be real estate investor, and I am in the middle of purchasing my second investment property, a 4-plex in Austin, TX. It needs a ton of work and I am trying not to get scared off. The fourplex will need about 150k in repairs sometime in the next next 1-5 years. The foundation is solid but everything else will need to be replaced at some point. I will have to spend 20k right off the bat to fix certain things. It is fully rented out and once I can update them a little, I should be able to get about $1050 a month for each unit (2/1s). It is a great neighborhood close to big shopping and plenty of tech jobs. This little 4-plex pocket is in transition that is starting to attract a different type of tenant. The main goal is have cash flow for retirement in 30 years once paid off.

       The reasons above are the reasons I want this 4-plex. I know that down the road it will have a big return but it will require a lot of work. I will be inheriting 4 tenants which makes me a little nervous too.

    I feel that this may be the only opportunity I will have to buy a 4-plex in Austin. It is the least expensive one on the market (out of like 5). What do you think? Will it be worth it in the end? What is like to acquire tenants? 

Thanks!

Kim 

    

Is the property cash flow positive the way it is currently structured?  The first thing I would do before even considering repairs would be to find that out.  I also listened to a BP podcast the other day and one of the dialogues that stood out to me was to find all the reasons to NOT do a deal.  If this deal doesn't make sense because of repairs, don't do it.  

We are putting 25% down, with the current rents - the mortgage we will cash flow about $600 month. However all the tenants have been there for several years and rents are too low. I get it though because the place is a mess. Either way rents should be closer to 1k making it a $1200 cash flow. Having to increase rents is something I've never had to do before.

Don’t make the deal personal. On one hand there are always more deals, limiting beliefs are what give you the notion there may not be another. On the other hand don’t let limiting beliefs prevent you from doing a deal that’s a good deal. 

I can’t answer whether you should do the deal or not, that’s a personal decision. But know your numbers and let your numbers make your decision. If you know your numbers and the numbers make financial sense then go with your gut. 

I would love to look at the deal with you and help in any way I can. Feel free to reach out at the email below. 

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