What makes this deal unattractive? Multifamily - Enterprise, AL.

Question

Good afternoon BP. I have seen these two multifamilies on the market for YEARS (700+ days) at this point. With the multifamily inventory so slim and the rents slowly creeping up, what is keeping investors away from this property?

https://www.zillow.com/homedetails/307-Colony-Dr-Enterprise-...

$190k. 4-plex, 2b/1ba ea, around 800sqft each. Descriptions says rents are in the 525-575 range, but area estimates likely should be 575-650 range.

https://www.zillow.com/homedetails/309-Colony-Dr-Enterprise-...$170k. triplex, 2b/1ba ea, around 800sqft each. Same rental schedule.

Ive lived in the area before and am moving back soon, and yes its in a low income and somewhat sketchy area. the surrounding culdesac area needs some love. the interiors arent the standard flipper gray LVP countertop combos, and there are some signs of at least cosmetic blemishes and landscaping that would make it visually more appealing. With steady rents even in its current state, this doesnt even need to be a value add play to BRRR.

Even at asking price for both- $360k with no rehab, 100k down. Rents at 550/mo x 7 doors = $3850. Mortgage at 6%,10% management fees, insurance, mx fees, landscaping, etc. I have estimated at around $2800/mo. Cash flowing at $1000/mo net at the low end of rents in this market doesnt seem to warrant over two years sitting on Zillow.

Im missing something...

Thanks for the thoughts,

Dalton

Ben Fernandez · Answer

How much due diligence have you done outside of the public details?

Have you; checked for code violations, seen the SPD, checked crime/safety, if tenants are paying, if mechanicals are properly functioning, flood zone, etc?

I see a shooting occurred 3 days ago nearby and those doors look beat to hell, in addition to the obvious barricade (2x4) across the patio door. Are there a lot of break-ins? One front door is replaced and a few others look like they get in fights everyday (metaphorically speaking)...

There has to be underlying reasons why this property hasn't sold in two years. Do your due diligence and determine if it's something you want to undertake. The sellers appear to be very motivated.

Don Konipol · Answer

If you’ve never owned class D property in a “tough” area you aren’t cognizant of the ultra high expenses of operating these properties; the amount of time it can consume; and the brain damage it can cause. Ok here’s what the listings won’t tell you

1. Obtaining and keeping a quality property manager is nearly impossible

2. Tenants leaving apartments in the middle of the night trashed is common

3. Property attracts “professional” deadbeats who know how to manipulate the court system to live “rent free” for 2-6 months

4. Section 8 with holds payment if the apartment is damaged in any way - even if the tenant damaged the apartment on purpose

5. Old D properties require continual maintenance and repair.

6. Expenses run double A or B units, 6-% higher than C units

7. You might as well trash any qualification criteria because nobody interested in renting these apartments would qualify

8. The police will be at the property once a week for every 6 units for domestic disturbance, burglary, arson, assault and or murder.

Don‘t take my word for it; purchase these beauties and let us know how it turns out !

Dalton Muchow · Answer

Where did you find the shooting data? The top few free sites on Google don’t have much in terms of specific crime related data. I’m new to this so that would be a great resource.

Agreed on the exterior state of the property- trash in nearby bushes, signs of physical struggles, poor workmanship on repairs, etc.

I just see so much in the “guru” space on socials for section 8 or low income renters in these types of neighborhoods that you’d think this would have fit somebody’s niche.

it’s certainly not for me, but an interesting qualitative edge case that I can’t quite quantify.

What makes this deal unattractive? Multifamily - Enterprise, AL.

What makes this deal unattractive? Multifamily - Enterprise, AL.

Most Popular Reply

4 Replies