5-Condos Deal Analysis. What Would you do?

Question

I found an investor who is looking to get out of the business and wants to sell 5 condos. He wants $425,000 for the 5 and generate $5570 income. 2 of them the rent could increase a little $50 each. They are all rented at the moment. Here is the break down

Monthly Income: $5570

Monthly Expense:

Taxes: $593

HOA: 1250

Vacancy: $278

Cap Ex: $278

Managment: $445

Mortgage $1,559

Total: $4,681

Monthly Cashflow $889

Cash on cash return of 9.61% with 25% dp

He said the HOA fees are increased this year and will go down next year for a total of $1000. This calculation is with the increased fees. HOA covers insurance, water, garbage, sewer, and snow. If the HOA fees drop that will put me at $981 monthly cash flow and 11% cash on cash return.

What do you guys think? I do plan on talking him down and hope to buy it for around $400,000. Did I miss anything?

Account Closed · Answer

Talk to seller whats his POV?

Account Closed · Answer

It appears your vacancy is approximately $667 per year per unit aka half a month vacant during each year.

However remember the property management will also  charge one month rent to find a new tenant.  Worst case that would be 464 hit to monthly average if all went vacant.

Still cashflowing even in the worst case...

Account Closed · Answer

Sweet im jealous get him down to 400 and wholesale to me for 405

Nate Wilson · Answer

I couldn't agree more. I am looking for a good deal. I am surprised that the numbers look good at 425k. I want to make sure that I have equity in the property. Thanks for the response.

Thomas S. · Answer

You now know the real value. If you can not convince the seller to drop below $350K it's a deal you need to walk away from. I would also be expecting a discount for buying all 5 units. Bulk price 60K each. What he thinks they are worth is irrelevant and paying more than they are worth simply because they will still cashflow is irrational thinking.

Phillip Richardson · Answer

@Nate Wilson condos offer pretty solid returns. Tough to finance and scale, but looks like a decent deal.

Nate Wilson · Answer

@Michael P.

I did a little digging and found out that similar units are selling for 60-70k each. Meaning I would be paying way to much. Market value would be around 300k-350k. Obviously  the cash flow would be even better. What do you think I should. Things don't seem to be adding up.

Nate Wilson · Answer

@Michael P.

Do you think I missed anything  in the calculations?

Nate Wilson · Answer

@Nate Wilson

I forgot to list repairs for $278 which Is included in the 4681.