3 Unit in Middletown PA - Is this a Good Deal

10 Replies

Cost= $83,000                2964 Sq. Ft       3 bedroom 3 bath  1 garage

Near local college

Monthly Rent =$1355 for all three units      Median Rent in area is $550.00 per unit

Property Taxes 2994

Insurance 600 per year

Interest Rate 4%

Tenant pays heat and electric

Down Payment 29679 (includes 4134 closing costs)

Monthly payment 754.49 includes insurance and taxes

Expenses 1300 (Gas, water and trash)

@Ethel Weaver

If you have all these numbers I would encourage you to finish up the math for yourself, then post the entire analysis so others can look at your completed work. So take this all the way to completion.

Go ahead an calculate the percentages for vacancy (10%), maintenance (5-10%), cash flow, CAP rate, and ROI percentage.

This way we can not only look at the deal for you but also help check and grow your own ability to fully analyze a deal.

Ryan

Cost= $83,000     2964 Sq. Ft          3 bedroom 3 bath 1 garage

There are two long term tenants

Near local college

Monthly Rent =$1355 for all three units Median Rent in area is $550.00 per unit

Property Taxes 2994

Insurance 600 per year

Interest Rate 4%

Tenant pays heat and electric

Down Payment 29679 (includes 4134 closing costs)

Monthly payment 754.49 includes insurance and taxes

Maintenance  1620

Gross Income $15447

Utilities = $1500 (Gas, water and trash)

Admin Costs $300

Total Expenses $7014

NOI = $7620

$10,000 set aside for improvements

Cap Rate = 7620/97134 = 7.84

Cash Flow = 2095

ROI = 6% (2095/34884)

Please let me know if these calculations are correct.

What type of financing will you be using? What are the terms?

I'm concerned your maintenance number may be a little low as that's a very old building and you will have lawn/snow costs for a multi unit.

@Ethel Weaver

First of all the downpayment at 36% is too D*** high.  I wouldn't pay more than 20% down.

Secondly the rents are too D*** low

What is the garage rent?

Why is there an owner's gas bill if the tenants are paying heat?

What type of heat is there?  Electric baseboard and oil would be negatives?

4% interest sounds good is it fixed for 30 years?

What is the overall condition of the property?

Is there deferred maintenance?

Is the seller distressed? REO, bank sale, foreclosure, short sale, bankruptcy, divorce etc?

The rent is $1,355 and the expenses are $1,300, sounds like a whopping $55 a month not counting CAPEX.

Personally, I don't see a deal here, what am I missing?

It will be a 15 year loan.

The property overall condition is good.  The owner purchased in 2012 put new electric last year.

It is not a distressed sale. 

Current owner allows tenants to store the stuff in garage.  The attic can be easily turned into an additional bedroom.

The heat is electric.  There are only two water heaters therefore the owner is currently paying the gas bill.

@Ethel Weaver I do a lot of work and manage a bunch of properties in Middletown, I know the property you're talking about, it's currently under contract, did you buy it?

I'll reach out to you off-line to discuss more, would love to work with you.  I currently work with about 10 other investors buying and/or managing properties.

In my opinion, this one would be a decent deal if you could get the rent up to $550/unit.  I haven't seen the inside, but I manage a couple other properties in Middletown and the lowest I get for a 1 BR is $525 and it's pretty small.  I would think the rents are under market.  This property you're describing is just up the street of one that I manage.