Analysis of 2 apartments for sale ( 4 total units)

Analysis of 2 apartments for sale ( 4 total units)

Investor · Jackson, TN · Member since 2016 · 17 posts · 2 votes
Good morning BP, I'm a new investor trying to get into the game and came across this listing near me and wanted to bounce the information off you guys. It consist of two apartment units for sale and it is section 8 eligible, all apartments are currently occupied . It generates an income of $500 per unit per month, total gross of 2000 per month. Taxes are $1000, insurance roughly $800 annually. Asking $139,900 and is wanting to sell fast. Current owner completely renovated all four units within the last two years. He's stating he is simply wanting to get the money out for another investment opportunity. New roof last year. There are a lot details I don't have yet as I've only had one conversation with the present owner. This seems to be a very solid investment and I don't see it being on the market very long. I know I need to ask more questions but I'm not sure what all information I need to collect. I want to move quickly but don't want to hurry the process and make a huge mistake. I know there are other interested parties. I know nothing about section 8. Thoughts and suggestions are welcome. Financing and down payment are not an issue. This is my first post. Thanks to all who offer direction. Cheers, Lance
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  • Wholesaler · Salem, OR · Member since 2016 · 31 posts · 10 votes
    10y

    Hi:

    Using a 50% expense ratio it looks like about an 8.5% cap. rate.  That doesn't look bad but I don't know your area.  You need more detail on potential expenses.

    I find that lower rent units require more effort to manage for the same money.  My experience with section 8 is in Oregon.  These are my observations. 1.  Condition of units have to meet their standards.  Units are inspected regularily. 2.  Renters don't want to lose section 8 so don't cause problems. If goverment is paying part the renter has to pay their part promptly and on regular basis.  3.  Renters seem to be harder on low rent units and it is the same for section 8.

    I would rent to more section 8 clients so over all it is a positive experience.

    Good Luck

    Bill

  • Investor · Jackson, TN · Member since 2016 · 17 posts · 2 votes
    10y

    @Bill Jacobsen, many thanks for the section 8 info. I wasn't aware of the benefit/comparison. 

    I am expecting to walk through the property or have an inspector walk it for me soon. I was able to walk the exterior (vinyl siding) will need to be repaired/replaced soon. The structure is very simple, basically 4 walls under one roof (4600 sq ft) so I expect that replacement will require $5k-$8k here in W. Tennessee. That estimate is not really based on much research but I figure I need to include some estimate. I've asked to speak with the current landlord's handyman thinking he would be able to provide good insight related to the current tenants and property condition.  Is this common or an unacceptable request? 

  • Jackson, TN · Member since 2015 · 15 posts · 5 votes
    10y

    Hi Lance,

    Is the property in your home city? I am looking to invest there.

  • Investor · Jackson, TN · Member since 2016 · 17 posts · 2 votes
    10y
    Originally posted by @Eoin Maher:

    Hi Lance,

    Is the property in your home city? I am looking to invest there.

     Eion, No it's not in Jackson. I moved from Memphis to Jackson and I like to keep an eye out for opportunities in both locations. Just starting out here. We should connect sometime soon.

  • Investor · Newberg, OR · Member since 2016 · 90 posts · 19 votes
    10y

    Hi Lance,

    Sounds interesting. At what CAP rate do properties in that area tend to sell for?

    Good luck,

    Evan 

  • Investor · Jackson, TN · Member since 2016 · 17 posts · 2 votes
    10y
    Evan, I'm discovering that information now. New twist, found the property assessment data last night and discovered it is zoned commercial. So now I'm going back to the spreadsheet to run the new numbers based on a bank side loan.
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