Multi family

[Dondi Sanchez]

Hello, my name is Dondi. I am a newbie because I have not done a deal yet. I have a question I hope one of the more seasoned investors can help me with.

There is an 8 unit property for sale by an asset manager about 40 minutes from where I live. How do I get an ARV on a multiplex? What are some of the things to look out for?

Just to give you a bit more info, there are 4- 2/2, 2-1/1. All are full with tenants and one of the tenants lease is up in a couple of months. I don't know if he wants to stay.

Sale price is 169,000 it's from an asset manager they are only accepting cash or private money

It's concrete block

Square foot is 4760

Built in 1964

ppsf: 33.50

No HOA

Roofs are not currently leaking but can be redone, minor bath repairs in 2 units

Monthly rent is 3055.00 a month plus at closing you get the tenants deposits total of 2920.00

Please let me know if I could give you anymore details but I would like your input on buying this property.

[Joel Owens]

2 main keys on this one:

1.accepting cash or private money

This will cause issues as you are dumping all your cash down which 169,000 I would do it this way.

3,055 rent a month ( verified by the market of course before running your numbers ) with no rent credit add backs that lowers actual rent.

3,055 X 12 = 36,660 expected gross income X .40 (landlord paid utilities) = 14,664 NOI

14,664 NOI / 169,000 = roughly 9% annual pre-tax cash on cash. On this old of a property isn't that great.

The other part is if you get private money the rate is likely to be higher than a conventional loan which will squeeze your cash on cash. Sounds like from what this person is saying the KEY question for the seller is this:

How long have you owned this property and how long has it been stabilized?? It sounds like a turn around deal where they know it will have financing issues due to not being stabilized at 90% occupancy or better for the last 2 to 3 years.

2. The age of the property. A property built in the 1960's can have galvanized plumbing and a host of other issues. I am not worried about what I can see but what I cannot lurking underneath. You can have big repairs on a small building with limited income grow due to unit size. Those repairs can affect cash flow for years. If this was sitting on a big piece of land where you can tear down and repurpose with a higher unit density or a different commercial type of asset you could do well.

Get answers to the 2 topics I mentioned and this should be revealing on how you proceed with the property or not.