Ugly Property - Good Numbers

[Roel Alvarez]

Hi BP!!!!!  I'm a long time reader, first time poster and a podcast junkie.  Looking for the collective wisdom of BP community to help me out. 

I'm looking to do a 1031 on a condo that recently was vacated.  I have good equity that I'm looking to roll over.  On a side note, condos can be a great investment if the numbers make sense.  They've worked out for me so far.  I'm now looking to move to next step.    

One of the properties I'm looking at is a 8 unit building.  The property is 7x 1 unit and 1x 2 unit apartments with good bones (outside structure and base) and it is close jobs;  big Fedex distribution center, airport and industrial park.  The challenge is the apartments are quite small for the area and building is ugly (on a main street across from industry and a tree service company storage lot next to building.  The building has parking but not ideal (gravel side lot that needs to be paved) and the 1-br units are quite small for area.  The building is ugly, looks like overtime it has been hacked into 7 -1 bed units...legally.  

I would say it is a C- building (not D cause in decent shape) in a B/B- neighborhood.  The numbers make sense though.  The asking price is around 480K, current rents are over $68K yearly (including laundry) and with some remodeling can raise rents to 73K a year.  Expenses including utilities, bills, capex and vacancies come to $32K.  That leave $36K for mortgage and reinvesting money.  

These are my concerns:

1. Will I have a hard time renting the units?  The current rents are $250/m under market for 1 bedroom.  I can fix them up and bring them up at least $100/m which can help.  I'm hoping this makes it easier.

2. What kind of tenants will I get?  Am I getting problematic tenants?

3. The property has been on market for sometime.  When it's time to move up am I going to struggle selling this building?

Thoughts...?