[Wilmington, DE Deal] Help me analyze this deal

3 Replies

Originally posted by @Levi Fleming :

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*This link comes directly from our calculators, based on information input by the member who posted.

 Overall your numbers aren't bad...you just have them in the wrong areas. 

Your vacancy is going to be 8-10%. Your capex and repairs are going to be closer to 10%. Water and electricity you shouldn't be paying for. If the current owner is paying them it likely means they aren't separately metered, which isn't surprising since according to the county tax records this property is not approved for a non-conforming use variance from the zoning board. As such I would check that the electrical and plumbing have been inspected and ask the owners to provide proof of their rental license. Wilmington zoning board is, generally speaking, not approving new variances, as such if you get caught with an unauthorized, illegal rental unit you could be fined and forced to convert this back to a single family (I've seen it happen to other investors). Not only will you have huge out of pocket expenses to do all the necessary renovations, but your rent will drop from $1400(according to the MLS listing) a month down to $950-$1000.

Oh...and in my opinion...you'd be crazy to take an investment with only a 6% planned CoC return. Especially in this neighborhood of Wilmington. If it was Trolley...maybe it would be worth it if you had nothing better to do with your money or at least exchanged the lower cash flow for fewer headaches as a result of a higher quality tenant base.

@James Masotti Thank you for this detailed response. All very valuable information. I will take all of this into consideration and rerun my analysis to see if this makes sense for me. Also, I would very much like to connect offline sometime. I will inbox you for your availability. Thank you again! 

Hi Levi!  I'm familiar with the area and looked at this one online a few times.  Looks like they are separately metered, but @James Masotti is an excellent source for information so I'd take what he says as sound advise ... HEY JAMES ... lol  I'm with James on you not paying for water and electricity.  If you do pay, you'll want to consider a rent increase to potentially cover yourself.  If the current tenants are used to the owner paying for those you may have some vacant units in the near future.  With it being in the hood, I don't see any big appreciation even with the Riverfront poppin.  You're going to want to at least meet the 1% rule (which it does), but the return on investment rate should be be at least between 9 - 10% to make it worth your while.  With it being a multifamily, you'll also want to make at least $100 per door.  It's listed at $105,900 and they had a price drop in August.   IMO you'd have to get it for what you're asking or less, manage the property yourself, but still account for the 10%.  Play with your numbers some more to see if you're getting closer to those points.

Well wishes and blessings in all of your REI endeavors ... Cassandra