12 Unit Off Market (what do you think)

[Cody Elliott]

Hey guys, I recently came across a 12-Unit Multifamily "Deal" (using that term lightly) and I wanted to give you all of the Info and see what you guys think its Worth. Or if its worth Pursuing. Its in an A-Class area.

This would be a Long Term Buy and Hold. My plan would be to get Conventional Financing with a Rehab Loan, and Refinance my Cash Out (I have the Cash for up to a $200,000 Down Payment). Also considering, using a strategy from the BP Podcast, Depositing $100,000 into a CD at the Financing Bank, as a means to negotiate better Terms, like a longer Fixed Term, or a Higher LTV%, also allowing me to Borrow against the CD.

The Owner is 70, and has owned the Property for 20 Years, and has a history of lowering rents instead of doing deferred maintenance.

**All of this Info has been gathered before approaching the Owner**

Property Info:

-Built in 1940's

-12 Unit Building 6-(2Br/1Ba) 6-(1Br/1Ba)

-Tax Value $1,300,000

-Annual Taxes $16,000

-Current Rents are ($850 for 2/1) *couldn't find info on (1/1) but it is well below market Value

-1920's Renovated Building in the area Rents for ($1,245 2/1) and ($1,045 1/1)

-No Property Manager (owner managed)

-Owner Pays Water and Utilities

-All surrounding Apts. pay for Water/Sewer Only

-(A Class Area) with Mixed Use Buildings and Student Living

-Walking Distance to University

-2 Units currently Not Rented

Rehab/Needs -(from what I can see)

-New HVAC, has Radiator Heating and Window Units

-Living Room Floor (Sinking in) on Top Floor Unit 

-Cracks in Interior Walls/Exterior Brick

-New Roof (I'm assuming) Large leak in Top Floor Unit

-New Fire Escape Staircases 

-Updated Electrical

-Updated Plumbing (I'm assuming) built in 1940's

-Interior Updating

I know its a lot of Work, but It's in a great area, and there is a ton of room for Value Add.

[Michael Ealy]

Originally posted by @Cody Elliott:

Hey guys, I recently came across a 12-Unit Multifamily "Deal" (using that term lightly) and I wanted to give you all of the Info and see what you guys think its Worth. Or if its worth Pursuing. Its in an A-Class area.

This would be a Long Term Buy and Hold. My plan would be to get Conventional Financing with a Rehab Loan, and Refinance my Cash Out (I have the Cash for up to a $200,000 Down Payment). Also considering, using a strategy from the BP Podcast, Depositing $100,000 into a CD at the Financing Bank, as a means to negotiate better Terms, like a longer Fixed Term, or a Higher LTV%, also allowing me to Borrow against the CD.

The Owner is 70, and has owned the Property for 20 Years, and has a history of lowering rents instead of doing deferred maintenance.

**All of this Info has been gathered before approaching the Owner**

Property Info:

-Built in 1940's

-12 Unit Building 6-(2Br/1Ba) 6-(1Br/1Ba)

-Tax Value $1,300,000

-Annual Taxes $16,000

-Current Rents are ($850 for 2/1) *couldn't find info on (1/1) but it is well below market Value

-1920's Renovated Building in the area Rents for ($1,245 2/1) and ($1,045 1/1)

-No Property Manager (owner managed)

-Owner Pays Water and Utilities

-All surrounding Apts. pay for Water/Sewer Only

-(A Class Area) with Mixed Use Buildings and Student Living

-Walking Distance to University

-2 Units currently Not Rented

Rehab/Needs -(from what I can see)

-New HVAC, has Radiator Heating and Window Units

-Living Room Floor (Sinking in) on Top Floor Unit 

-Cracks in Interior Walls/Exterior Brick

-New Roof (I'm assuming) Large leak in Top Floor Unit

-New Fire Escape Staircases 

-Updated Electrical

-Updated Plumbing (I'm assuming) built in 1940's

-Interior Updating

I know its a lot of Work, but It's in a great area, and there is a ton of room for Value Add.

Cody,

What's the sales price?

Tax value is irrelevant. How much are similar units SOLD in the past 12 months? Although multi family are valued based on the income, it will be good to find how much similar properties sold in the past 12 months so you have an idea on the cap rate.

Sounds like a lot of work. You can easily spend $100K in rehab or more.

If I were you, if you're serious with this as your first deal, you should partner with someone local in your area with experience doing a deal like this. 

You have to have a lot more cash in reserves for multi's because if something goes wrong, you have to shell out more money out of pocket. Read the story of a 48 unit building I used to have (below). One of the mistakes I made was not having enough reserves...but after 6 years, I sold that building and made over $1M (so I am OK but there were times I wondered if I could hold on to the property).

https://www.biggerpockets.com/forums/311/topics/64...