Should I purchase the 7 unit multi-family?

[David Dale]

Hi Guys,

I am a fairly new investor and I am looking at purchasing a 7 unit apartment building. It is located in a mid-sized regional town with a good employment base. I am more familiar with SFR, so I am somewhat anxious about jumping into multi-family. I am curious as to what potential hurdles, deal

Issues you think I may run into on this potential purchase.

The details are:

7 unit building

5 - 2 bed 1 bath

2 - 1 bed 1 bath

Total rent is $4500 per month with tenants paying utilities.

Purchase price is $425k.

I have a community bank that will let me do 10% down.

Nice appreciation area for single family homes, but I’m not sure of the market for investment properties as it is a smaller town.

Thanks for the feedback.

David

[Mack Benson]

The information available is pretty light. I do like the unit mix and that would be a killer price per door in my market but I'm not sure about yours. 

What's your play here, you mention appreciation for SFR so is appreciation your plan? For commercial properties you have two ways to increase the value and force appreciation; decrease the expenses or increase the income. The property will be valued off of the NOI, which is income - expenses (not including debt service), divided by the market cap rate. Do you have room to raise the rent or decrease expenses? I'd take a look at the T12 and go from there.