First deal with potential... 20-unit complex... thoughts?
I am a complete newbie, but I've been searching for property dilligently for the past 6 months and I believe this one has potential... what are your thoughts?
# of units: 20
- all 1 bedroom
- all 360 sq ft
asking price: $379k, down from $399k
year built: 1995 (pretty rough shape though)
current vacancy rate: 30% (6 of the 20 units are vacant)
current rent: $125, collected weekly
location: decent... this property is probably the worst eye sore inside of a 3 block radius
- working class area... some gang-related concerns... all in all a pretty solid town
expenses: all utilities... approximately $1,900 / month
repairs needed: not sure at this point... 10k-20k would go a long way in improving the look and appeal of the property and would likely reduce vacancy rate
cap rate: 9-10%
Based on the numbers, this is without a doubt the best property I've looked at, but I have a few questions:
- What are the best ways to reduce vacancy rates, generally speaking?
- If small capital improvements would go a long way in terms of increasing the value of the property, what would your approach be with the bank if the goal was to minimize up front capital requirements?
- What concerns would you have with a property that has been around for 30 years and looks pretty rough?
- Given that the surrounding area is relatively nice, how much money would you put into capital improvements (hopefully provided by the bank) if the end goal is to maximize profits. Note: I'm not sure there is a lot of room to increase rents... $125 / week for 360 sq ft already seems pretty high, I think.
- What would your initial offer be?
Obviously, none of you have time to answer 5 questions, but if you could just pick 1 or 2 that you feel good about, that would be tremendously beneficial. Thank you so much for your comments and advice!
RK