Analysis of 4 Unit Opinions

2 Replies

My goal in real estate is to establish long term cash flow. 

Looking at a 4 Unit town home style property.  List price is $275,000.  I think I can get it for $210,000.  

Property consists of 2 units with 2BR and 1.5BA and 2 units with 3BR and 1.5BA.

Rent is $750 + 750 + 850 + 850 = $3,200

Taxes and Insurance are no more than $1,000.  Only utility paid by landlord is water/sewer.

This is located in a prime location with high property values for the area. Market value of SFR in the area are $175,000-$300,000 I recently purchased a SFR (purchased for $70k + $6k improvements = market value $115,000) in a very slightly less desirable location and am renting for $1,000 per month so the units are bringing in near what a nice SFR does.

Rental demand in the area is strong. I put the SFR for rent and had 15 calls in 3 days. Showed 4 times and had 2 very good and 2 very bad applicants.

Two questions: 

1) Is this too good of a deal to pass up and worth the risk of high monthly expenses?

2) Is this a better idea than purchasing foreclosed/dilapidated SFR and converting them to rentals? That market is extremely competitive.

I can see the potential here.   The cashflow will be ok, not the best.  Taxes and insurance of 1000 per year is nice.   What are the other expenses involved.  Is this unit close to a college?   or this is an area that is demanding rooms for rent for local professionals?  

It may be more attractive for you to rent rooms.   

Check this out.   

you have 2,   2 br units and 2, 3br units.   Thats a total of 10 rooms you can rent for $450 per room

$4500 per mo in income.    

Here in Charlotte there is a growing demand for room rentals with long term tenants. 

What would a room rent for in your area.   Especially something close to a college.   

Mom and dad will pay the rents, not the students.  

I like the fact you are deciding on units.  There is alot to do there.     

From your numbers and using a 50% expense ratio I get over a 9% cap rate.  Assuming your cost of money is under 6% I think it is a good deal.  Also, look at Gerald's suggestion to increase your income.

By the way, I seldom find properties that need no repairs.  Be careful.  Good Luck.

Bill

Join the Largest Real Estate Investing Community

Basic membership is free, forever.