Under Contract on a 4plex
I am UC on a 4 plex and there is everything wrong with this property.
Major Foundation issues:
- floors diving all over the place
- cabinets separated from the floors by 5 inches in one spot
- sewer line previously broke in foundation (they jackhammered floors, and replaced broken portion, but didn’t re level, so line still has belly holding 1” of water)
- Concrete deck on second level failing (no supports, concrete chipping and cracking, rebar exposed.
- Needs Roof
- soffits collapsed in 1 area leaving attic exposed
- water damage
- 2 water heaters needed
- in flood zone stream runs through property
I own 1 house hack, but this would be my first big boy investment. Just feels like everything that could be wrong is wrong. Getting a structural engineer, but wondering if walking away is the prudent call here. Max gross CF about $3k/mo once fully leased with section 8, most likely closer to $2k. With moderate assumptions for maint, reserves, vac, barely cashflows. But has potential being four 3/2 units (most quads around here are 2/1’s. Just curious to get thoughts here. I know no deal is perfect, but just wondering im walking into a world of hurt, or I should try to make it work. Motivated sellers (tried to term 2x, they keep trying to keep me in the deal.
Most Popular Reply
I'm guessing given the purchase price that the earnest money was something like $10,000? Obviously that's the cost of walking away, unless you have an inspection contingency, an inspection contingency would be your leverage to work these issues into the deal.
I've personally never purchased a deal with so many issues. Making repairs after buying something is not a deal breaker, so long as you work those into your plan. Some of those issues (Flood zone, water damage, needs roof, foundation issues) I think are worth cutting losses over. If my vision for the property and use of the property as a building block in my portfolio wasn't fundamentally changed by the new repair plans, then I would keep it. Are there better deals available? There should be turn key fourplexes available at that price (maybe not in your market I don't want to assume)
If no inspection contingency. The seller is now aware of these issues and would probably need to disclose them to any other buyer, they might be willing to negotiate because of this alone. If they don't, you could even back out of this contract and still engage them with a fair offer price for their property (with repair costs considered).