4-plex in Fort Worth, TX

[Nick B.]

Hello All,

I am considering buying a 4-plex in Lake Worth area of Fort Worth, TX and I'd like to get your opinions on this deal. Here are the details:

• Low-low middle class neighborhood; although houses look more or less neat and overall feel of the area is positive
• Subject property is in the cluster of other 4-plexes; the rest of the area is SFRs
• All 4 units are 2bdr/1bath, 800 sqf.
• Built in 1985.
• 2013 NOI was $12600 but this number excludes one time charges (appx. $3000) and does not include taxes and insurance. If I subtract taxes and insurance, NOI goes down to $7000.
• Rents are $622.5/mo (avg) with total scheduled gross rent being $2490/mo or $29880/year
• Two tenants have outstanding balances of ~$150 each. Late fees?
• Only half of the property taxes for 2013 are paid by the owner. The other half is still due. I noticed that the owner paid in 6 month installments in the previous years as well. Big deal or not?
• The owner is out of state and originally bought the property in 2005 while still being out of state. He may have never visited the area.
• Asking price is $200,000.
• The building was previously listed for $160K in 2010 and then removed from the market. Then it was listed again in Feb of 2014 for $200K and removed a month later. Is this a sign that the asking price is too high?

If I value this property using 10% CAP rate, the price I come up with is $70K based on last year's NOI. I don't know if the building need immediate repairs or has deferred maintenance. If it does I would subtract these costs from my offer.

Is $70K a good price for this building based on the information provided or am I way off? $200K is definitely way too high but what is the "right" number?

I will ask the seller's agent about deferred maintenance and Schedule 'E' for the last 3 years. Is there anything else I need to ask for?

Thanks
Nick

[Tyler H.]

Have you actually viewed the property or are you just crunching numbers?

City of Lake Worth can be sticklers about rental inspections, check with them To see if there are any outstanding violations on the property.

Picking it up for 70K is a long shot, but 200K asking price seems high to me for Lake Worth.