Help analyzing our first multifamily deal

[Koren Shoshan]

Hey everyone,

Background- My partner and I opened an LLC about 2.5 years ago (after we bought our first house), and we always looked for new deals. Four months ago we bought our second house, and now we are looking for our first multifamily deal. We are thinking of buying it as our primary house so the Down Payment will be around 50K. This house is in South Carolina.

This is the description:

"Welcome to the perfect investment opportunity! This exceptional real estate listing offers four charming 2-bedroom, 1.5-bath units, presenting an incredible chance to expand your portfolio. Three of these units have undergone extensive remodeling, receiving fresh paint, upgraded appliances, new flooring, efficient HVAC systems, and brand new water heaters. Meanwhile, the fourth unit remains in excellent condition and boasts new HVAC and water heater installations, awaiting your personal touch to further enhance its interior. Situated in a highly desirable location, this property offers convenience at its finest. Residents will relish being within close proximity to an array of amenities, including shopping centers, medical facilities, schools, restaurants, and much more. The surrounding area provides an attractive blend of accessibility and lifestyle, ensuring an enticing living experience for tenants. An added bonus is that all four units are currently leased, generating a steady stream of income from day one. For detailed rental information, please refer to the attached document, which outlines the rental rates and lease terms. Don't miss out on this exceptional investment opportunity. Schedule a viewing today and witness the potential this property holds. Act now and secure a lucrative venture in the thriving real estate market. NO SHOWINGS allowed until due diligence, please don't try to contact tenants. All HVAC units were replaced recently as well as roof."

The rents are:
The first unit- $885.00
The second unit- $935.00
The third unit- $950.00
The fourth unit- $995.00
Total- $3,765.00

Asking price- 440K.

More details we have and added:
Tax $375.00
Insurance $250.00
Landscape $120
Vacancy + Repairs- $240 (our assumption)
Property management(9% although we currently managing our property)- $340 (our assumption)
This deal was already in a contingent status and the buyer asked to talk with the tenants, the seller refused so the buyer quit.
My partner lives nearby this neighborhood and we know it's a pretty good place.

Our questions are:

1. Do you think this deal is worth it with this small cashflow it has?

2. What would be your first offer?

3. Could you please share what would you check more about this deal?

This is my first post here, feel free to give me feedback, thank you. :)

Best Regards,
Koren Shoshan

[Troy Gandee]

@Koren Shoshan It doesn't seem like a bad deal. Especially not for a primary residence. The taxes will be much lower than an investment property, which will be helpful.

It really depends what market you're in, the immediate area and the condition of the home. 

Cap rates and values different significantly from Charleston to Columbia to Greenville, so he ROI will be different in each market. It also looks like at least $995 is the market rent for the units in good condition, so you should be able to bump the under performing units up a bit over time.

In the Charleston market, it's almost impossible to find anything at the 1% rule anymore, so not likely you can get the seller down that far. We're usually closer to a .75 or .80 purchase price to rent ratio (ex. $750/$800 in rents, purchase price of 100k). I would probably try to start in the 420/425k area, but if all the mechanicals are good and I can easily push rents to 1k+ without much work, 440k could be a good buy. Again, I don't know enough to tell you for sure, but these are generalities based on my market.