Is this a good deal for buy and hold?
Hi,
I am looking at purchasing 2 four-plexes (seller's stipulation that buyer must buy both at the same time). Each four-plex is going for $129K in Phoenix. Each building has four two-bedroom/one bath units that are 720sqft.
I did some rental analysis using the BiggerPockets SFH spreadsheet. We determined that each unit could rent for $500-$600/mth. Assumed $550/mth which turns out to be $52800/annual (8 * 550 * 12). I assumed a conservative 25% vacancy loss (1 unit out of the 4 vacant each month, could be a lot less). Gross income = 39600.
For expenses, I determined:
Property taxes: 1500/yr
Insurance: 3095/yr
Maintenance: 5760/yr (assuming $480/mth, 12%)
Water/Sewer: 3000/yr
Property Management: 3600/yr (assuming $300/mth)
Advertising: 150/yr
Total Expenses: 13410
NOI = 26190
The catch is that each building will require extensive rehab. I'm estimating 30-40K for each building.
I'm in contract at 129K per building. But, just got back the inspection reports with all the items that need to be fixed. I am getting quotes on the fixes. I'm thinking of asking the seller for a credit/price reduction to help offset some of the costs of the fixes. I'm not sure how to calculate how much should I ask for? Or when will the fixup costs make this investment not a good deal? The comps on other 4-plexes that have sold are at $159K on average but they appear more fixed up than this one. My agent says that this 4-plex will be much nicer after my fixes (I'm taking this with a grain of salt).
The seller said that they had multiple offers on the property so I am wondering how much to push back.
This is my first multi-unit purchase and appreciate any suggestions.
Thanks.