What would you pay for this 4-family building??

[Erin K.]

4 unit apartment building - current rents are $480 (2BR), $435, $425, and $365 (all 1BRs).  Landlord pays for trash ($840/yr) and water/sewer, which is $125/month.  Property taxes are $1,400/yr.  Insurance will be about $k/yr.  We had some inspections done and the electric is shot and I have a quote for $4k in necessary repairs. Plumbing is in okay shape, but definitely will be some issues to deal with in the future.  I don't think there is a lot in the way of immediately necessary repairs to the apartments themselves.   

The $365/mo tenant has been there for a long time, and, while he always pays his rent on time they say, he is a major hoarder, and mentally unstable. Has pictures of women's underwear ads taped all over the apartment, and the place is a filthy, packed mess.  When we were doing the electric inspection, he thought we were going to be asking to look in his apartment again, so he stood at the top of the steps and started screaming, "I'M TIRED OF THIS F-ING SH!#!!!"  Would want to get rid of him asap if we buy it.  He's on month-to-month lease at this point.  Could also then increase rent amount for new tenant.  

Not sure what I'm leaving out that would be helpful, but looking for thoughts as to value. 

Thanks! 

[Wes Brand]

Sounds like a headache waiting to happen and I probably wouldn't take it.

If I had to buy it for some reason I'd offer somewhere in the 30-40k range. I figure you have about 10k / year NOI and you need an unknown amount of extra work (at least 4k, probably 8-12k). The low base rents and problem tenant make it seem like a not-so-hot area. You'll have quite a bit of cleanup work to do once you move him out of his unit, if you can move him out. A 30-40k offer gives you about a 20-30% return, which would be enough to make me think about jumping through the hoops to get the person out and the unknown risk that my rehab costs balloon closer to the 12k range. But...that's me. I don't want problems with my investments so my numbers for problem cases tend to be ridiculous.