In negotiations on the following deal – appreciate thoughts

[Jason A.]

Hi all – would appreciate thoughts on the following deal:

Three family for sale in decent neighborhood

Siding, windows and roof all replaced in the last 8 years.

Some challenges:

Substantial deferred maintenance on the interior – needs two gut reno bathrooms in short order (would likely aim to do so at next vacancy). Rest is simple stuff: paint, rugs. Kitchens are OK.

o Front yard looks like a war zone – needs new yard and flower beds.

o Two of the three units share a water heater and oil heat… so landlord has done a “rent included” deal and covers nat gas and oil for these two units. This means I’d be exposed to the price fluctuations of these commodities and tenants with no incentive to conserve. Not ideal obviously. (All electric is individually metered).

Some of the positive considerations:

o I would do much of the renovations and improvements myself

o The basement is a walkout and can be finished into additional living space – so additional bedrooms would work. Have spoken with municipality, the basement cannot be turned into a 4th unit unfortunately.

o The biggest deferred maintenance are the bathrooms – so while a major cost, something I could absorb.

o Depending on cost (which I have no experience estimating but am working on) I could segregate the nat gas an oil for the two units which, over time, could pay off with each tenant covering their respective usage.

Price: $250K

Gross rents are $3,300

Expenses are $1600/ month (very conservative, includes $420 in utilities which are covered for two of the three units as mentioned above).

Factor in another ~$300 per month for vacancy (9%) and NOI is ~$1400/ month $16,800/ year.

Cap rate is approx 6.5.

Appreciate any thoughts. All the properties I own thus far have been out of state or new construction – so this would be a hands on project / new thing for me.