I have had two deals that were under contract fall through in the past two months for my first multifamily property. I could not find any other deals which interested me at the time so I made a craigslist add stating I was a local investor interested in multifamily properties. I received a decent lead fitting my criteria in a neighboring city about 30 min away from where I live. The property is a triplex. Has great curb appeal, new siding, great area of town, high traffic walking distance to area's high school and middle school so great area. The owner bought the property for 38k in foreclosure. when he bought it the water lines were busted, he replaced the water lines and a few other things to get the property up to par and to be rented. The owner now occupies one unit and the other two units are being rented for 400 and 450/month. The owner seen my ad and we've discussed a price of 68k for the property he has not listed in on the mls or on craigslist I was the first person he spoke to.
Property Details: Price 68k, Triplex, 1bedroom/1bath 2bedroom/1bath 3bedroom/1bath, 3800 sq ft, built in 1900, insurance 1204.87, taxes 1703.46, water 108.00/month (average), with the gross income current 850/month with an owner occupied unit so one could say 1400/month.
NOW, here's the jist of my post. The property needs some work looks beautiful from the outside but defiantly needs some work on the inside. There's just a lot of stuff that's out dated and could be replaced but the tenants seem content and the owner says they pay on time every month. My question for bigger pockets is should I skip on this property since its an older property and more susceptible to needing more frequent repairs or should I buy a newer property closer to the 100k range that most likely wont need any repairs in the next few years. For the size, area, and the overall property i'm getting it at a discount compared to comps in the area so i'm wandering if I should buy this property at a significant discount and know that I have some things that will pop up or should I go with the more expensive property but more likely will be less of a headache which is also in my current city while the other property will be a 30 min drive?? The owner bought it in unrentable conditions has made it rentable but not put an extensive amount of work into it he realizes he can make a margin and just wants to make this a quick flip is this a good deal? Please bigger pockets professionals help me out i've been thinking hard on this and as my first property and two properties under contract already falling through I want to make my decision as smart as possible.
So bigger pockets professionals does the age of the property matter to you guys or will you pay more for a newer property? Would you get discouraged from a deal due to the age of a property?
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You will getting differing opinions here but you really should look at the deal. It is not just about things happening- you need to evaluate what the value is of the property you are looking at. How old are the mechanicals- the furnace, the water heaters, the pipes, the wiring. What environmental issues does it have asbestos? lead? 10 years old or 50, if you need to replace these things because no one has already then you need to replace them. How old is the roof? Cosmetics are the smallest part of the cost of updates. Figure out what it is going to cost to fix the items still to be updated and compare that to another available property and the amount of life left in its roof, furnace ect. Newer doesn't mean you won't have to fix it everything has a usable life.
The only place where it won't matter one way or the other is insurance, the insurance is directly based on the age of the property to a certain extent regardless of updates.
@Skylar Dejesus Get an estimate of what it would cost to update the property & how much you could increase rents as a result of the update. Then assess how long it would take to recover the investment from the increased rents or if the property can then be refinanced for you to recover your investment. This is just a numbers game.
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