I have been getting creative looking for properties and reached out to an owner with a 24 unit complex that is not on the market. The reason I am interested is because the owner would "consider seller financing, depending on the terms". The property is in a very good neighborhood and five minutes away from my home, so I could self-manage. There is a property manager who gets free rent and takes care of the yard, but I would not need the property manager. The building was built in 1968 and is low maintenance with all new appliances and remodeled units. Owner goes there once a month to do major jobs that need repairs. I did some rent research and the $600/mo is very reasonable for these 2 bed town homes. Only garbage, yard, and snow plowing are included - tenants pay for everything else. Owner states the needs $900,000 for the mortgage balance to be transferred.
Data provided by the owner:
- income - currently 13005 a month (14400 at full capacity at $600/mo each)
- mortgage - 8096 a month including taxes and Insurance
- electric - 60 a month
- garbage - 140 a month
- income 4709 a month
This would be huge step from my current four family property, but I am interested. What is the best way to analyze/ determine if this property is a great investment? What challenges do I need to consider? What next questions do I need to ask the owner?
Bonus: a picture of the complex (there are 3 buildings with 8 units each):
it's really no different than a house or duplex, just that it involves extra items. definitely include cap ex. do u know how much parking lot resurface will cost? a ton! the roof is two times a ton of cash.
electric is too low. how about gas ? are they metered individually? if he does the work, he is either super cheap or can't afford to hire it out cause he will lose money. what u should look for is a run down place that u can bring back to life
Few immediate questions
Potential purchase price ?
RE Taxes ?
Management? ( 10 - 12 % ) <- snow removal
Estimate immediate renovation ( upfront cost ) ?
Owner willing to carry a potential 2nd seller note ?
Upfront check with your potential lender regarding seller 2nd note <-----
Cost to replace the roof in the future ?
Current useful life left for water heaters and furances ?
tenant leases ( month to month or yearly )
Double check the tenant rent rolland leases
I would view a profit and loss statement for the past 5 years from his CPA or a copy of his IRS statement. When I buy an income property each unit has to put in my pocket first $100 per month minimum before I would consider the deal. Then subtract your expenses from the remainder income. Is there money left and is there enough for un-for-seens as I put it. I usually figure in 5 % for that per year. Basically what would it cost you personally to own that property?
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