help analyze potential first deal

[John Bucknum]

Hi BP,

new investor from Pittsburgh, PA area. A friend alerted me to a potential first deal up the road from him. he is an investor, all SFR in this same town, where is very active in the community, i.e. on board, volunteer fireman, etc. he originally wanted this property almost 20 years ago. At that time, it went for 70k, now listed for 339k. the town has had some recent growth from medical center growing, and increase in some industry in the area. he told me they expect a food manufacturing plant to be built in the very near future. additionally, the county courthouse is in town. The landlord wants to retire to NC per RE agent.

The building is a quadplex, built in 1910, probably an old school house one block from main street which has shops and is very walkable, in fact while town is very walker friendly. it is situated about 30 minutes from Pittsburgh airport. Currently,  all units are rented and the vacancy has been low.

they are asking 339k, Zillow estimates 240K.

gross rents 27k

2unit are  1/1 $550 month

1 unit 3/2 $ 600 month

1 unit 2/1 $600 month

expenses:

elec 40

W &S 60

garbage 45

insurance 65

taxes/month 365

pls excuse me if I forgot any number or you need more info

I have put it through the calculators at asking price and at 250.  From my calculations, even at 250k it is around the 1% rule.(2%? rule).  I would probably have to do traditional financing to afford the deal.

some of the thoughts/concerns I have are:  

with the low vacancy, should the rents stand an increase?

there is a massive basement, with a 15x15 area portioned off for w/d and small storage closets for all units. the rest of the basement has concrete floors in poor shape with the mechanicals.

the electric is divide already, but from what I am told the electric company will only allow for one bill, rather than splitting it.

it is a good school district as well. 

thanks for your thoughts/comments??

[Brian Garrett]

I would see if the rents can be raised. I'd like to think you can get more for the 3/2 unit than the 2/1 unit and maybe even your 1/1 is under market rent.  Check the comps and see if you're in line with the market.

Also don't forget to account for expenses such as property management, vacancy, CapEx and maintenance.

Lastly you need to know how you're going to finance the deal in order to properly analyze it.  Without knowing that you can't determine your bottom line in order to calculate your projected cash flow.