4plex population 150

[Andrew Carlson]

I found an off market 4 plex built in 1920 or so. The guy wants $100,000 for it. He is willing to do seller financing. Two of the units are rented at $550/month. Those should be bumped to $600. The other two units are vacant and need about $5,000 each worth of work to get up and running, and should get $600/month. It probably needs a new roof in order to be financeable if I want to sell it after fixing it up. I got one quote of $20k for the roof. The exterior needs roughly $5,000 in general repair/landscaping. Supposedly he talked to a realtor that said it would be worth $200k once all 4 units are rented and it has a new roof (seems like a reasonable guestimate).

The kicker for me is that the town has a population of 150 people….that’s tiny. It has shrunk by about 40 people since the 2010 census.

I have looked on Zillow and single family houses seem to sell in the $130k-$180k range.

Not sure if I found a diamond in the rough, or a trash heap that should be avoided at all costs. What I’m wondering is, should the fact that this town is getting smaller steer me away from this deal? Or should I just stop worrying and go for it?

[Chris Webb]

I would suggest you ask for terms. Many investors I know do "your price, my terms" which will improve your Cash on Cash return. Also, get an independent broker price opinion on the property. Ask some rental agents about the rents. I would not be worried about the population, especially in today's world. $600 is cheap in any market. Especially when comparing to other markets. What are the rents in the surrounding areas? If this is on the outskirts of any higher priced places, the population will probably grow. We are growing in population in this country, generally speaking, so I would not worry about that. Now - I do not know the market and if you have a pulse on the market you will know if this is a gem or trash. Stick with your gut, usually it knows what is best.