16 Unit / 7 Property Deal analysis help? Please?

5 Replies

Hi all! I havent posted in awhile due to rehabs, but I have had the opportunity lately to settle and start picking up more property. Another landlord in the area wants to sell all 7 of his properties, for 16 more units. Im currently at 8 units, but im not sure that this deal is as good as I hope, and its a lot of money and risk so I wanted to reach out. This is a c class area, with some properties being in better neighborhoods than others. My current properties are already in this area so im familiar. My concern is that right off, its losing money, but has good potential in my mind if I can retrain the tenants or swap them out.

1 Quad, 1 Tri, 4 Dup, 1 SF

Purchase price: 420,000 @ 4% interest with 2 year call (possible extension for another year). Seller Financing with only 25000 down. This puts each property at roughly 60k, which is what im using as a basis to refinance or HELOC them out of the mortgage. One of the properties is a quad I can probably refinance or HELOC for 80% of 140,000, but some of the other properties should be priced at 30-40k. And although Im super hesitant to use this figure in my purchase decision, my realtor comp-ed them out at 750k ARV.

Last Years Actual Rent Paid: 62,777 
Last Years Gross Rent Billed: 109680 
Pro Forma Rent:
110,000 - 140,000 based on minor improvements/cleanup and then rent increases/tenant removal

PITI: 5500/month. (66000) P 1600 + I 1300 + T 2000 + I 400

Expected Vacancy and unpaid: 15% (16500)

Maintenance + Capital: 10% (11000)

Net currently: -4000 Net Projected: 31,500

Projected ConC: ~100% with 25k down and 6500 closing costs.

Thank you for taking the time to look at these numbers. I greatly appreciate it. Please let me know what you think and/or if I should update the post to be more clear or contain more information.

You can get these for $26,250 per unit and the seller is willing to carry some of the financing. I don't see what the problem is. Even if they rent for $600 each unit, I would buy it. I would evict any tenant that gives me any trouble at all. Renovate that vacancy, then increase the rent on it. Repeat until the profile of the tenant meets your expectations.

@Daniel Whiddon At that price per unit I’d buy that all day long. I’d start renovations unit by unit as they come available or as you evict, not huge renovations unless absolutely necessary but making them nicer.

Two tone paint, better counter tops, new bathroom grout, clean rust stained toilets, laminate vinyl flooring that should last longer than carpet, etc. better landscaping. Cheap fixes. Like $3000 tops and raise rents. Unless you’ve got some system’s problem like a water heater or furnace.

Even if you can eventually raise the rents $100 a month that’s like $19,000 more a year. In my market $19,000 more cash flow is at least $75-100,000 more value. So then you’d be potentially worth $520,000 when you refinance if not more.

I think you’ll kick yourself if you let this one get away.

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I gotta ask why there's such a delta between the rent billed & rent paid.  110k billed and 63k paid indicates 47k difference, and you're only showing a 15% unpaid/vacancy at 16.5k.  Where's the other 30k in difference coming from?

The current owners wife has been sick the last few years and passed away last week, along with a realtor that acted as a property manager sometimes collecting cash, there was a lot of unpaid or 'lost' rent and no action taken. The tenants need to be retrained or evicted and the property manager quit when I told him I was coming in. I'm at 0% unpaid and vacancy on my current units, but will have to bring these new units up to performing.