Ok, here it is:
My offer is 173k with 13K back at closing.
Total Purchase Price $173,000
Seller Concession $13,000 (roof repairs and closing costs/fees)
Downpayment (15%) $25950
Debt Service: $1330 per month
Finance $147,000 x 9%= $1330
Gross Rents: $2775
$400 (15% vacancy/rent loss)
Effective Rent: $2370
Expenses $1100 (water, insurance, taxes, trash, grounds, misc.)
Do I buy or pass?
Repairs: $20,000 (high estimation)
Using the 75% "Rule", smart purchase price is closer to $149,000.
Maybe I should pass?
Here is the way I see this deal:
Acquisition cost: $180,000 (purchase price + repairs)
Gross Rents: $2,775
Operating Expenses: $1,387
Debt ($180,000, 30 yr, 8%) $1,320
Cash flow: $68 per month
So the question becomes how many units are we talking about? This cash flow is a little low if the answer is one unit. If it is two or more units, the cash flow is very low.
This deal has some potential at a lower price. I would calculate the cash flow based on the number of units and make an appropriate offer.
There are (5) units. There is room to increase rents. Of course, the units have to be cleaned up.
If they're candidates -- condo conversion.
Then again, I'm a big fan of such a thing.
no condo market here.......Boston, NYC it might work, but not in Little Town, USA.
The numbers don;t work, but I plan to put my office in the building so there is a reason outside "the numbers" to purchase this. It would work perfectly as an office...plenty parking, busy location, etc.
With 5 units, this is a bad deal (very bad) with $68 total cash flow. I'd make a much lower offer.
Run the numbers at 130K putting the same $26K down @ 9%
If you can't do between $100 & $200 a month per unit, then it's a dog.
If your first offer doesn't embarass you, it's too high.