New to BP looking a 4 unit complex would like some opinions

8 Replies

Hi I just join BP. Been doing a lot of research on real estate the last couple months. Never had a mortgage before.  But the opportunity came to me thru a friend. She is live in a 3 bd 2 bath apt. In The build that has a total of 4 units. One more 3 bd 2 bathroom. Then 2 two bd 1 bath units. 

I’m interested in trying to acquire this property located in Norfolk,va. 

Owner asking 300k for the property. 3 units occupied now. One vacant. 

I attempted to use the bp calculator. 

Looking for any advice on what step I could take in evaluating this property and any advice on funding this property 

Welcome to Bigger Pockets!

Start figuring out if you can qualify for and afford a loan on the property.  Figure out what you can rent them for (:start with what they currently rent for, and look at ads for equivalents).  Estimate the costs involved.  See if the totals can support a good return on your investment.  Consider what price would support the return on investment you want - the asking price is just a starting point.  For income property, you can get good comparables based on the rents paid and costs of the property - if the seller is using an agent that agent should be able to provide those.

A lot of these costs may depend on your location.  Consider property taxes, utilities traditionally paid by the owner in that area (water, trash, electric, gas, ...), repairs, maintenance and landscaping, costs to service the loan, etc.

If your friend would become your tenant, would you be willing to raise the rent on her?  Would you evict her if she didn't pay you?

I definitely would want to raise the rent after doing some minor repairs considering the things I know about the property. Unfortunately the evict process is part of business. I would hope she would continue to pay her rent on time. I was thinking it would probably be a good is to occupy  the vacant unit myself. 

Do you think a conventional loan or FHA would be better being my first property

Trying to learn from others experiences I used the BP calculator and at the asking price it’s showing a positive income of $423 per month. What a good return on investment percentage in your opinion. 

I believe the calulator was showing 6.85% increasing over time 

A good return on your investment would be what makes you as the investor satisfied.  Consider what returns you can get from other very safe (paying off existing debt you carry) investments or riskier investments (eg: stock market index funds), or what you can get from a different property.  

If you are going to occupy it, you may want to look at FHA loans. You may be able to get a cheaper loan, or one with a lower down payment. A lower down payment decreases your cash flow (because you'll be paying a larger mortgage payment), but ties up less of your capital which you may be able to deploy elsewhere.

Projected rent is $$950 for the 3bd units and $850 for the 2 bd units 

So $3600 total

One upstairs unit I was told from the tenants was poorly insulated upstairs  causing high electric bill. Hence it’s vacant so I’m estimating those repairs to be around $5000 to do both units if needed. And another $10k. For any minor repairs n upgrades . 

Looking at the numbers I was looking in the $250k range being a good purchase price. 

But at $300k asking price the total purchase price should be around $320k