Strategy on *OLD* 10 unit apartment building? What would you do?

[Jeff Nydegger]

 I am interested in your experienced feedback and opinions on this deal specifically. Thank you in advance.

We currently own some small, less than 20 unit multi family buildings. I was presented with this off market opportunity and have been working with the seller for about one year now. They have on the property over 30 years. They are elderly owners and self manage. The building is what’s in question…

We don’t know the specific age even after pulling all of the county information but I would guess that it was built around the turn-of-the-century, 1900 or so.

The building is not something that we would normally look at because of the set up – the units have gas stoves,Radiant boiler heating, common water etc. Everyone is currently on a month-to-month lease that’s obviously a gross rent. Basically, it’s one of those buildings you drive-by in the dead of winter in on the third story the windows are open because it’s too hot up there but the tenant is not paying!

Radiant boiler heating, common water etc. Everyone else is currently on a month-to-month lease that’s obviously gross. Basically, it’s one of those buildings you drive-by in the dead of winter in on the third story the windows are open because it’s too hot up there but the tenant is not paying!

Because of the high utility costs and abuse, below average rent and an older building with some definite functional obsolescence, this is why we hesitate to move forward. Because of our history and experience, remodeling the building is not the issue at all. The owner actually put a brand new roof on the building last year.

We have also considered instituting the rubs system on utility charge back per square foot of the building. Most likely if you purchase this most if not all of the tenants would vacate as this will be new management with a new set up and honestly I would like to go unit to unit and do our rehab as quickly as possible.

Rents are between $350 and $600 gross. I believe after we spent some money on the building and show some easy improvements those rounds can easily increase a minimum of $100 per month. If we do some sort of utility charge back system and I still think rents could increase and we could attract better renters in general.

Rents are between $350 and $600 gross. I believe after we spent some money on the building and show some easy improvements those rounds can easily increase a minimum of $100 per month. If we do some sort of utility charge back system and I still think rents could increase and we could attract better renters in general.

I should preface this by saying the building is in an area that is somewhat world of draws from many larger towns and there are not many rentals available at all. Average rent in this area starts around $700-$800 for a dump!

Building has low taxes and nothing else really is out of whack. There is on site parking and very little yard to mow.

Curious as to how any of you would handle the situation and what your thoughts or concerns might be specifically due to the age of the building? I don’t think this is something that we would prefer to own long-term but possibly go through the building And improve the property throughout.

Gross rental income is currently around $55,000 but I think it would be more like $70,000 once improved. Purchase price is < $250,000 for 10 units.

Thank you.