Does this sound like a good deal?

Question

I am looking at a property that has a little bit over an acre of land. It has 10 single family homes. They are asking around $200,000. 7 out of the 10 are rented out. They are renting on an average of $470 dollars a month each. A little over a year ago they were all rented out. The PM has done a poor job of taking care of these and getting rid of the renters that do not pay. They do not have any stove, refridgerator, washer, dryer, or A/C unit. I think that I would be able to do some cosmetic such as flooring, painting, appliances, and be able to raise the rents. Thoughts?

Glenn Bodnar · Answer

depending on the grade of property, work the deal backwards to determine your purchase price. Total current rent minus vacancy minus pm fee minus taxes minus insurance minus rent ready cost minus 10% opps. Divided by (desired annual return). Come up with price and take another $15k off to start.

Antonio Jucoski · Answer

Hello David Lee

Have you been able to work this deal out or are you still working on it?

Michaela G. · Answer

@David Lee - talk to some other investors reg. wholesale pricing for investors in your area

Carpet, with pad, installed shouldn't be more than 1000-1200 per unit.

Paint seems pretty high

You can find good used appliances for $ 100-200/piece for fridge, stove, stove

David Lee · Answer

@Mary B. thanks for the replies and here is what I have so far. The taxes are around $1,900 a year. I will bill having the deal financed but do not have the terms set as of yet. I assume as I go into the deal that all will need the same things such as flooring around $2,000 dollars per house. $1,400 to paint on the inside. The outside of the houses have vinyl siding. I have priced the appliances at $1,600.

Mary B. · Answer

@David Lee Yes, you mentioned rehab as I was wondering the total cost needed so you can get those houses occupied at the $500 or $550/mo mark. Also what's the total property tax bill per annum? Will you pay all cash or have it financed? If its to be financed what are the terms? Are the occupied houses in good shape or will there need to be repairs on them as well? I know its not as easy to get in to inspect occupied residents particularly seven of them. Just trying to bring all of the figures to the forefront to get a better view of whats at stake.

Kudos,

Mary

David Lee · Answer

@Michaela Graham I have only got to look in 3 out of the 10 but None of the homes have appliances. All of the utilities, water, and sewer are separated and paid by the tenant.

David Lee · Answer

@Mary B. Within a 1/2 mile rents on rentometer rents on average are from $400 to $550. In the whole city of Winston Salem NC where it is located they are around $1,100 on average. A lot higher then I would place these at. I am thinking no more than $550. There are houses across the road that are around $200,000 homes that would rent for $1,500. I would be the PM most likely for the first year while I was going everyday to rehab the homes. After they were rehabed I would most likely hire a PM. What do You mean by the Addition NUmbers?

Michaela G. · Answer

So, that's about 10 SFH at 20K each. Sounds pretty good on the surface of it.

None of the houses have fridge, stove and other appliances? Or is it only the 3 vacant ones that have stuff missing?

It's kind of unusual to have 10 SFH on the same lot. Are the utilities all split? Public water and sewer or septic tank?

Mary B. · Answer

Is there room to raise the rent? What are the addition numbers crucial to this deal? Are you looking to be the pm only or owner / pm?

Kudos,

Mary