Multi-Unit House Deal?

[Ryan Smallegan]

Hello All,

I am new to multi-unit rentals. I have done single family homes but I know that with more tenants come more trouble. The deal I am currently looking at is as follows:

9 Unit House with rental income totaling $5150/mo (at current pricing with current tenants)

They are asking $300k which doesn't seem too terrible.

Any input into this deal or into rental a multi-unit older house would be greatly appreciated!

Thanks,
Ryan

[Joel Owens]

Just on numbers.

5,150 by 12 months = 61,800 gross expected rents

If landlord pays no utilities the divide by 50% assuming no immediate repairs needed.

61,800 /2 = 30,900 = 309,000 sales price at a 10 cap.

If landlord pays water etc. then 60% costs = 37,080 costs = 24,720 or 247,200 at a 10 cap for sales price.

Remember to study the rents hard. If the seller is charging those rents but giving credit for waived security deposit or half or full months off first rent then that's not really the rent rate.

Also the seller could have charged those rents when the units where newer shape years ago and now the tenants slow or late pay or a recent foreclosure in the area has made rents come down. Now the tenants want upgrades or they are leaving upon renewal to the other place for cheaper money.

If there is work to do to the units then you will need to deduct the CAPEX off for your offer price. So if inspection reveals immediate 30k of repairs in the next year then deduct from say 247,200 to arrive at a 217,200 offer price.

Many more variables and I can go on forever but this gives you the basics.