Feedback on Apartment Rental Building

1 Reply

Hello,

Im looking for some feedback and thoughts on a 6 unit apartment building that Im looking to at for a long term buy and hold. The property is located in Fairview Park. Outside of Cleveland. All units have been updated. Consists of:(4) 2 bedroom units and (2) 1 bedroom units. Most leases expire next year. 1 unit just went vacant, is rent ready and can be placed.6 garage spacesTurnkey unitsNew hwt's, 1 new furnace.75% new windowsHardwood floors
Electric panels inside units are fuses. 5 furnaces are older. Currently owner pays utilities on executive rental, which I would turn into normal long term tenants. There asking for 450K

I've been pre approved for a mortgage on the property costing about 2,200 a month at around 7% interest rate.

The potential for the property is with increasing rents and cutting the expenses of the building. My current CoC return would start at 3% with potential to increase with those changes made. Please see pic below

Thank you and looking forward to hearing from you all 

Just a few reactions.

You have $300/year for repairs and capital expenditures.  You might get lucky and that may be true for year 1 but if this is  a long term buy & hold, that is simply wishful thinking. You will blow more than that on replacing carpet on a unit turn.  If you are pushing rent, expect about 50% turnover every year.  Just a swag, but I'd probably put $4,000 to $6,000 for annual repairs and maintenance in my projections.  You might need more.

You may want to bring some capital improvement funds to upgrade your electrical system, so I'd add in some costs for that.

On the other hand, what is up with your interest rate?  Most people are in the 3s right now.  I'd get a new broker.  That will save you a lot of $$ if you get a competitive interest rate.