First multi-family deal , good or bad!?

Question

Jerry W. · Answer

@al

@Al Martin undefined, first your purchase meets the 2% rule which is extremely good.  One of the biggest things with multi family properties are owner costs.  Are the utilities all separately metered or is the landlord paying any?  if you are paying water, sewer, gas, electric, snow removal, lawn care, and everything else you will be shocked at the monthly cost.  These appear to have separate furnaces so hopefully the gas is separately metered.

Try to see the actual balance sheets for  the property.  I have a very small apartment complex and 10 to 20% of the gross actually goes to utilities.  That really eats into the profit.  Thanks to BP I am aware of the importance of that and am trying to change that but getting folks to work on a 90 year old building is tough.

For maintenance it is also nice to know if the water lines are copper or galvanized, if sewer is new or cast iron, if wiring is romex or rod and knob, if you have fuses or breakers etc.  Do a lot of due diligence, come to the forum and ask questions if you need help, or even if you do not.  Be careful of what neighborhood it is in.  Are the current tenants all on time with payments or are they 3 months behind?  Location is VERY important in rentals.  get your actual financing costs.  Is it 30% down at 6% interest for 15 years, or 10% down and 4% interest at 30 years?

Ryan M. · Answer

The first thing I do when checking a property is a pulse check, $2,600/$128,500 = 2.02%. You have a very good heartbeat there if this isn't a warzone with high turnover there will be good cashflow.

Bill Jacobsen · Answer

From my experience those are better numbers than any property I have purchased.  When I see rent numbers that are high for the asking price I really concentrate on the dud diligence.

Good Luck.

Bill

Chadi D. · Answer

First , I am not sure if you are a pro member . If so then plug all the numbers on the investment analysis and see what it tells you . It doesn't lie believe me . Though just from glancing what you put it seems a good investment and meet the rules.

Second , trust but verify . Take a look at all the leases , utility bills , verify that tenants are paying and other stuff ...

I went to see a fourplex that I was interested in and the numbers looked good . I went into one of the units and it looked like human trafficking . There were 7-8 people (looked like illegal immigrants)in the living room.I suspect that they were not visitors . On top of that I think that the owner pays the utilities .

I recommend Gallinelli book (what every investor should know about cash flow). It focuses on the above 2 principles , numbers and due diligence .

Good luck.