9 Unit Portfolio, Is This A Good Deal Or Not?

[JayCinta Henry]

First time looking to pivot into multi from SFR.

Came across an outfit that said they are off-loading their portfolio, to move into bigger deals. Portfolio is in a small town (45k population) in Ohio (I'm in Texas.) Price was listed as 260k, but after talking for a bit he said I was looking at the old price and the new/revised one is actually 190k, they had bought it back in April for 160K. They are offering owner financing with 10K down.  Here is the proforma they gave me

Type-Proforma
Sale price$195,000
Estimated rehab $25,000
Total investment$220,000
9 units, $21.6k PER DOOR!! Tenants pay electric. Room for rents to be raised post improvements. Close to a ski resort and sports car track.
Average household income of $50,000+.
Properties can generate a 17.78% NET return post improvements!!

PROFORMA
Gross income (annually)$52,260
Operating expenses (annually)$13,136
Net income (annually)$39,124
Gross return - 23.75%

Gross income (monthly)$4,355
Operating expenses (monthly)$1,095
Net income (monthly)$3,260
Net return 17.78%

QUADPLEX
Unit 1: 1 bed / 1 bath$465/month
Unit 2: 1 bed / 1 bath$465/month
Unit 3: 1 bed / 1 bath$465/month
Unit 4: 1 bed / 1 bath$465/month
DUPLEX
Unit 1: 1 bed / 1 bath$465/month
Unit 2: 1 bed / 1 bath$465/month
TRIPLEX
Unit 1: 2 bed / 1 bath$525/month
Unit 2: 1 bed / 1 bath$465/month
Unit 3: 3 bed / 1 bath$575/month
Total$4,355/month
Expenses
Property Taxes$263/month
Insurance$62/month
Water and Sewer$185/month
Maintenance reserve$320/month
Property Management$160/month
Gas Utility Bill$60/month
Waste Collection$45/month
Total$1,095/month

Is this a good deal? What would you do outside of these numbers, to independently determine if this is a good deal? What else should I look for or take into consideration?

[Tim Herman]

@JayCinta Henry You shorted your soft costs out. Vacancy, maintenance, and capex.  Banks will underwrite with a 5% vacancy. We can do a bare bones maintenance budget. I don't know what it will cost you to do a turnover so I am going to assume $1000. A 5% vacancy is the equivalent of a turnover every 20 months. How many repairs will be necessary during that 20 months. I plan on 1 every year at $150. So for 20 months lets use $225 for repairs. $1000 turnover cost plus $225 for repairs/20 months= $62.50 per unit or $562.50 per month for the 9 units. You will have to use your numbers to get the repair budget. You also need to do a capex budget that includes roof, floors, hvac, appliances, hot water heater, exterior paint, etc.

Go to your favorite flooring store and ask for the commercial warranty. Most will be 10 years or less. That is your lifespan. My area it is $6 sf to replace, Assume you have 600 sf of flooring per unit. 5400 sf*$6 sf=$32400/120 months lifespan=$270 per month for 1 item in a capex budget.

You will need to verify with a local pm what the vacancy runs in the area. No pm will do a 4% management fee. Better numbers makes better decisions.