Looking for Advise, 4 Condos, 32,000 a year income

Investor · Houston, TX · Member since 2010 · 101 posts · 18 votes

Looking for advice from the BP community. I have never purchased condos but I am thinking about this opportunity. Any advice would be great.

4 total units for sale
Three Units: 2B/2BA - 1,424 sq. ft each
One Unit: 3B/2.5BA - 1,720 sq. ft.

2B - rent for $650 each (can rent up to $700)
3B - rent for $750 each (can rent up to $850)
Minor repairs needed

Total Rent Per Month- $2,700 ($32,400 yearly)
Asking Price - $99,500
Gross Cap Rate - 28%

Property Information:

Glenwood Village
4 units all in the same Building
Building G Units 1, 2, 4 and 5
HOA - $221.25 per unit (covers trash, water, grounds and outside lighting)

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Percy N.

Developer · Philadelphia, PA · Member since 2015 · 2k+ posts · 904 votes

10y

28% cap rate is excellent but also depends on area, fiscal vacancies, etc Make sure you review condo docs and understand that the bylaws could change and usually they are not in favor of investors.

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Percy N.
Developer · Philadelphia, PA · Member since 2015 · 2k+ posts · 904 votes
10y
28% cap rate is excellent but also depends on area, fiscal vacancies, etc Make sure you review condo docs and understand that the bylaws could change and usually they are not in favor of investors.
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Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
10y
Originally posted by @Bil Casimir:

Gross Cap Rate - 28%
What is this? How is it calculated? How do you use it?
?
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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
10y
Gross cap rate means nothing to me when looking at properties. Need to look into what they will cost you every month vs what they are bringing in as well as what major repairs are needed now.
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Nick L.
Buy & Hold Investor · Milwaukee, WI · Member since 2012 · 378 posts · 179 votes
10y
@Bil Casimir
Have you seen the HOA docs? Are you allowed to rent out the units with no restrictions?
What are the HOA fees? What do they include? Any current or planned special assessments?
Re your calculation, gross cap is meaningless. You could say that the GRM (Gross Rental Multiplier) is 3.0. Even that doesn't mean a lot. Better would be to estimate your operating expenses and calculate the cap rate based on NOI. Assuming a 60% expense ratio for older units and a HOA fee, your NOI would be $13,000 and your cap would be 13%.
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Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
10y
Originally posted by @Nick L.:

@Bil Casimiryour NOI would be $13,000 and your cap would be 13%.
Which is also meaningless.
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