Good Deal or Bad Deal?

[Zachary Ballou]

Looking at my first multifamily home in the capital of my state Providence, RI. Less than a 5 minute drive from down town Providence. Built in 1922 property brings in about 2650 a month in rent and money from coin operated washer and dryers. All 3 units are currently rented. Has a new roof as of last week. Siding is half vinyl half wood. Some of the wooden spots would need to be repaired by seller for it to be approved for FHA loan. Has a retaining wall near parking that eventually going to need to be replaced Im estimating about $3500. Fire needs to be updated between units inside of house which I am going to try to get the seller to install as part of deal , but will probably cost about $3500 at the most. Has a garage that is in decent, but not excellent condition and the property has off street parking. No work needed inside except minor things such as a closet door or two. The area I would rate as being around a C+ area, but not to far down the road it gets worse, but going the other way it brings you right onto historic Federal Hill of Providence. Has a empty lot that is attached to the property that has been deemed unbuildable. However I was told by my real estate agent if I asked for a variance from the city and removed the off street parking of the property including the retaining wall the city might approve the variance. Meaning I could sell the empty lot for approximately $15-20,000. And that only would be if overnight parking is allowed in that area because I would have to get rid of the parking lot. The city is currently opening up more areas for overnight parking. If that was not the case then it would just act more as a backyard. Wiring and plumbing seems well maintained and properly installed (as of now). The asking price is at 179,000. Im hoping to start my offer at 165,000. Being priced at 179,000 the Cap rate is around 10.7 percent. My return on investment would be very high due to the fact i qualify for a grant given by the state of RI where i am not going to have to pay the down payment on the house. Rhode Island housing authority will pay it and I do not have to pay them back. Monthly income would be around 2650 and expenses minor and major would be about 2,000 a month. ( I largely overestimated expenses in this case due to the fact that I will put money aside every month for when something major occurs ) Leaving me with at the minimum around $500 dollars cash flow. I know its tough to give a definitive answer just from what I typed here , but good deal or bad deal. I love honesty so if it doesn't sound good let me know.

[Brandon Ingegneri]

I'll give you my 2 cents for what they are worth. You weren't specific as to the neighborhood that the house was in. From piecing together what you said, it sounds like it's somewhere to the east of Federal Hill off of Atwells. If this is the case, your bordering on a few different neighborhoods which all carry varying unique factors to contend with. Did you get a good deal or no? Not sure. Definitely would need to know specific area. Some are more manageable, others are complete war zones.

If it's one of those areas and your only cash flowing $500 a month, I'd say don't do it. Those areas, you'll have vacancies, court costs, and unreliable tenants at times. Very high crime neighborhoods. If your over estimating costs, and will in fact cash flow better.... Different story.

Be sure to take into account homestead exemptions on taxes if owner occupied. Tl