Deal on a 4 Unit in merrillville Indiana (NWI)

10 Replies

Hi guys,

I am looking at a deal in Merrillville IN, a 4 unit next to other multifamily properties. This is a quote from the broker, " He wants 250,00 for it. Has income of $2775.00 per month and expenses are trash bill of $800 per Year and sewer bill of $1050.00 per Year. Taxes are $5300 per Year and Insurance is approx. $1600 per Year. That's all the expenses." 

Here is some data I got from www.city-data.com on the specific neighborhood it is in (Turkey Creek Meadows), 46% white, 28% black, 26% Hispanic. Median family income is 58k, 13% unemployment,  Population density (people per square mile):1,361, Cost of living index:97.15, Median house or condo value ($):$125,560, Crime - City-data.com crime index:272, Owner occupied housing units (%):67.2%, Median gross rent ($):$1,223. 

That Information above is again, for the specific neighborhood, not the whole city. It is not on the border of Gary IN, but it seems to be closer then I would like it to be. I feel as if the proximity to the highway, shopping center(s), and golf course will help it out. I could be wrong but I am not afraid to admit that or ask questions. Current population of the whole town is 34,994 and it peaked in 2014 35,473 (was going up slightly until then). 


I hope I have added as much info as needed to give a "rough" estimate on the deal. Thank you guys :)

The lower the address, the closer to Gary. For instance, 5200 is technically Merrillville, but closer to 8100 is near mall stores, etc.

Message me if you have any more questions about the area, maybe we can help each other.

Make sure to account for capex, maintenance and property management

Originally posted by @Richard Moro :

Hi guys,

I am looking at a deal in Merrillville IN, a 4 unit next to other multifamily properties. This is a quote from the broker, " He wants 250,00 for it. Has income of $2775.00 per month and expenses are trash bill of $800 per Year and sewer bill of $1050.00 per Year. Taxes are $5300 per Year and Insurance is approx. $1600 per Year. That's all the expenses." 

Here is some data I got from www.city-data.com on the specific neighborhood it is in (Turkey Creek Meadows), 46% white, 28% black, 26% Hispanic. Median family income is 58k, 13% unemployment,  Population density (people per square mile):1,361, Cost of living index:97.15, Median house or condo value ($):$125,560, Crime - City-data.com crime index:272, Owner occupied housing units (%):67.2%, Median gross rent ($):$1,223. 

That Information above is again, for the specific neighborhood, not the whole city. It is not on the border of Gary IN, but it seems to be closer then I would like it to be. I feel as if the proximity to the highway, shopping center(s), and golf course will help it out. I could be wrong but I am not afraid to admit that or ask questions. Current population of the whole town is 34,994 and it peaked in 2014 35,473 (was going up slightly until then). 


I hope I have added as much info as needed to give a "rough" estimate on the deal. Thank you guys :)

Hey Richard,

I just accepted an offer on 5340 Pennsylvania St in Merrillville for much less than that. MUCH less. Don't buy those 4 units off the MLS... they're a rare commodity in the area so when people get their hands on them they overprice the hell out of it.

Let's get in touch. I can tell you about the one I just sold so you have an idea on what to look for. 

Don't worry so much about pro-formas and PNL statements. It's a 4 unit, and Hammond/Merrillville are in high rental demand. If the units are in good shape and the property is decent looking all you need is a good manager... and that sucker will rent FAST. Do you have a property manager already?

I can't speak much to the rental market as I haven't studied it much (only gained interest in real estate after moving to TX). That being said, I grew up in Crown Point, IN (right next to Mville) and would be very careful with tenant quality. It is in close proximity to Insbrook Country club though, which gives me a bit more comfort (used to work their and my family are members).

An 8% cap on that property is buying it at $200K minus rehab. But these brokers think they are master commercial brokers with those 4 units and list at 5-6% caps. It's only a deal relative to what you want for a return. If 6.5% is good- go buy it. If you want over 10-12%, keep looking but it'll be hard to find off the MLS right now.

Howdy @Richard Moro

Don't think that is "all the expenses". You left off some major expenses (Vacancy, Property Management, Maintenance, and CapEx). Each of those should be 5 - 10% of income. What condition is the property in? How old is it? You also did not include other miscellaneous expenses like lawn care/snow removal, pest management, accounting, and legal. Be sure to fully analyze deals so your not burned down the road.

Did you determine what the Fair Market Value for similar properties are?  What did other multifamily properties sell for?

Here is the NAPKIN that I ran with the numbers you posted.

Purchase Price $ 250,000
Cash to Close (15%) $ 37,500
Income:
Monthly Rent $ 2,775
Expenses:
Mortgage $ 1,403
Prop Taxes (2.15%) $ 448
Insurance $ 133
Prop Mgmt (5%) $ -
Known Expenses $ 154
Vacancy (5%) $ 139
Repairs (5%) $ 139
Total Expenses: $ 2,415
Mo Cash Flow: $ 360
Annual Cash Flow: $ 4,315
NOI: $ 1,762
Annual NOI $ 21,145
CAP Rate: 8%
COC Return: 11.5%

@Monti Harris You will regret not factoring 10% management a few years down the road when you are tired of managing and wish to turn it over to a property manager. 

Monthly cash flow $360 - PM not accounted for $278 = New cash flow $82 (Ouch!)

Good Point.  I missed that one.  I agree, I thought the deal was an ouchie.

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