Am I missing something?

[Robert Arquilla]

This deal has been on the market for a month now and to be honest I’m surprised someone hasn’t jumped on it, it seems like a cash cow. Here’s the description:

“Amazing investment opportunity! Fully rented units in prime location. Many updates in these buildings with great tenant history. The 3 buildings are a 6-plex, a tri-plex & a home that has been converted to a duplex. Don't miss this wonderful opportunity for an instant money making purchase!”

It’s listed for 250k for 11 units. I figure even if each one rents for 400 (which seems lower than market I believe) that’s 4400 a month. Taxes are 200-300 total. If financed using the traditional method that’s about 1350 per month. Plus 10% cap ex (440) 5% repairs (220) 5% management (220) that’s about 2200 left per month. Am I missing something? What are your thoughts? Seems like a great deal,close to shopping, probably a C area.

Thanks for the input!

[Randall Alan]

You have to dig into the details... you appear to be guessing at possible rents... call and ask what they are.  How big is each unit.. are they efficiency apartments at 350sf, or more full size at closer to 1000sf?  Who pays utilities, how old are the major systems (roofs, ACs, water heaters ?  Are the tenants on leases where you can’t change their rents?  Are they section 8 where you might have certain restrictions or possibly poor performing tenants?  What do they look like on the inside?  Are there structural concerns (sinkholes or whatever)?  Is the listing just totally lying about something (cross check info with county records - I’ve had people completely misrepresent square footage and amenities to the point we walked on the deal!

Bottom line... $25,000 per unit (or less) seems really cheap if it’s regular size apartments... but if they are boarding rooms (ie. Really small) maybe they are priced right?  ... Take a look at when they sold last and what they paid for them.  Make sure the price is for all the units combined (not some subset).   

I didn’t see property insurance listed on your list of expenses... that’s thousands a year in itself... my guess about $6000/ yr... so maybe $500/month.  

Just a few things to consider.  Hard to know what else to suggest without knowing more about the properties.

Best of luck!

Randy