20 unit property, deal advice

6 Replies

Im going to be buying a 20 unit apartment property.

im doing seller financing with 15% down on a 395,000 price with a 6% interest  

monthly rent total is $8,215 when fully occupied, 17/20 are rented

monthly expenses:

water-1100

landscaping- 200

taxes-226

insurance-70

future property management -600-700

seller payment- 2400

total is 2500-3500 (set aside 25% for repairs and vacancy of that. total) 

cash flow around 1800-2600

the property is real low maintenance, no washer/dryers, building is cinder blocks with concrete flooring, 

there is more story to the property but this is just a rough snap shot of it. 

good deal or no deal? thank you

Wow! That looks like a killer deal! Your numbers look pretty good. I would only make one suggestion. Consider being a little more conservative on the cap ex/maintenance. Give yourself a 30% buffer instead of 25%. If you make around $2k a month cash flow then you should be getting about a 40% return! That’s outstanding on 15% investment or $59,250 down. Great find!

Can I ask what city your buying in and what type of an area it’s in? That might be a big problem. The seller might be selling you a great deal on paper but could be in the ghetto. I have dealt with section 8 and it’s not the end of the world. It’s actually kind of nice but a little annoying dealing with the make ready after the tenants leave. It pretty much takes a majority of my cash flow for the year when they move out because sometimes things are broken or stolen. That’s why I say give yourself a little more of a cushion. Let me know bro!

numbers seem weird. $70 a month insurance on a 20 unit? the price is under $20k per door? need cap ex costs. Is this in a war zone or in a different country?
No it's not in a war zone it's on the east coast, no section 8 just a lower income area not in a real bad neighborhood. still looking into some of the numbers but that's what's on the lease summary page. it needs a little TLC. im flying out to see it next week. It's a real cash cow for the current seller he has no property management or loan payment. thank you for the tips. Semper Invest

@AJ Angel - I'll have to agree with @Paul Choi that $70 per month is extremely low for insurance. I suggest calling around and getting some quotes, as I would expect closer to $200 per month (or more, depending on the location and condition of the property).

I would also be interested in the taxes, as $230 per month also seems low.

What about Sewer / Refuse?

With seller-financing, what will the amortization look like? Will there be a balloon payment that would require you to come up with the full payment within 5 years or something similar to that?

Lastly: 25% for repairs, vacancy, etc: please take another look at these numbers. I would set aside 10% for maintenance and 10% for CapEx - that leaves you with 5% for vacancy, but you're already 15% vacant at time of purchase. Why are the units vacant? What is the average vacancy from the previous owner over the last 5 years? Are any of the tenants on lease, and will you be keeping them?

Some things to think about, but this looks like it could still be a great deal.

im looking more into the taxes, insurance, trash and sewage. The tenants are on a month to month lease. a lot of them already told the seller and agent they are staying put. they like the area and its affordable. i will keep the tenants and have the new property management work up a lease/contract for them. 

there is no amortization own the financing side that i know of.  no there isnt. after 3yrs of financial records /history and experience as a owner i will then get a loan on the property to pay the seller off. he will hold it for 3yrs.    

What is unit mix? 13- 1bd 1ba and 7- 2bd 1ba 

Thank you so much for the help guys. the questions and details provide are priceless. Im fairly new at this and still learning and growing.

SEMPER INVEST

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