Review/Critique multiple property purchase - Greenville, SC

[Amy Webber]

Thank you in advance for comments and advice. Sorry for the long post but wanted to make sure I had all the information in there for review - Thanks!

Package Purchase Price - $385k

SFR Brick Ranch @ 40k

Duplexes 3 (6 units) @ 345k

Will be using funds from refinancing other properties at 4.15% to provide 240k at closing, owner is financing the rest at 4.15% for 14 months so that we can refinance these at a year. No penalty for early payoff.

Basically, to get the duplexes that are in really good shape, the SFR in rougher shape is part of the package. My thought is to proceed with the duplexes for a long term play. We are undecided on what to do with the SFR this spring. Opinions and questions welcome!

Properties:

A) Brick SFR - 3/1 - 1100 sq ft -  Price 40k, needs 25-35k of work, market value is about 70k fixed up , would rent for $750 - $795. 

Options: 

1) Resell the SFR as is - maybe make a few thousand, break even, or lose a little

2) Fix the subfloor and prep the bathroom and kitchen to be finished for about 2500 and sell it to someone else to finish the kitchen and bathroom to their specs. Should be able to make a few thousand more

3) Rehab it, rent it, keep it till I can refinance it to get most of our money out of it. It would be worth what we have in it.  Could be worse but this is not ideal.

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B) 3 Duplexes - two story, 1990's construction with roofs less than 2 years old, HVACs less than 5 years old,, each side is a 1000 square feet 2 bedroom, 1.5 bath unit - $345,000 (or $115,000 each).  Comps are hard to come by - there is a sale for 60k, & another for 90k in 2014 for identical units on the same street, and a 2016 sale for same type of duplex at 130k on the same street so the price is reasonable especially for the market in 2017 for the area. 

Each duplex has one side rented at an average of $630 and one side is vacant as the current owner was rehabbing these to raise the rent. These units need some paint, some carpet cleaning, and the top boards of their decks replaced.  Each unit will take less than a $1000 to have rent ready.  

Market rents would be between $725 and $795 per my property manager (has another duplex in the same neighborhood that he manages).  The below market rental units would be raised gradually to market or raised when the units turned.

Duplex Numbers (All three together)

All Monthly Payments: $1600 (Repairs for empty units will be on an LOC and payment on that is included here)

Taxes: $500 per month ($6000 per year) - I think I can get these lowered

Insurance: $1200 per year

Monthly Income (($630 + 725) * 3) = $4065 when fully rented - Should be feasible by April 1

$4065 -1600(pmts)-500(tax set aside)-100(ins set aside) = 1865 remaining

$1865 - 325.20 (PM) - 600 (reserves) = $940 remaining

Thanks for reading this far!

Amy

[Charlie Price]

Good for you Amy! Here's a few of my initial thoughts for what it's worth.

1. I'd sell the SFR right away and get what you can. If possible.

2. When calculating deals I try to shoot low for rents and work in a moderate vacancy factor so I can hopefully be pleasantly surprised. Like maybe ($630 + $675-700) with a 10% vacancy factor along with no pays an eviction here & there. I also add on some exterior or landscape maint, and some misc expenses that always seem to show up, like needing a new stove, fridge, HVAC repair, etc. etc. etc.... Maybe you've calculate for these with your "reserves" moneys? I've never had much luck with duplex tenants taking care of the yards either. Even if its in the contract for them to do it. Especially at the $700/month rental market.

3. Good idea to try and lower taxes. We have done this numerous times on our properties. A little time and effort can reap hundreds or even a few thousand in lowered expenses.

4. $1,200 for insurance on 3 triplexes seems a little low to me. But you probably have quotes or previous owners insurance in place.

5. Purchasing, doing light rehab, advertising and getting three new tenants at 15-20% higher rents in just a few short weeks seems super aggressive. I would think that may take at least a couple months to do. But maybe you already have contractors and possibly tenants lined up? Again, is calculate worst case going in and be pleasantly surprised. :-)

6. I don't see where your paying back the 145K that is seller financed....$385 - $240 = $145K seller financing @ 4.15%. That's about $10K + per month for a 14 month payback! Or if they are low interest only payments or something else, the. That's a big chunk of change to come up with in a short period of time. Maybe your plan is to refinance all of them and get the money, which is more expense.

7. Not trying to rain on your parade, there are probably things I'm missing. that is great that your moving forward and making things happen. Congrats and good luck. Sounds like your doing well! These are just one humble mans opinions.