Give me your Opinion on this MF purchase! Good, Bad, Ugly...

[Trent Barga]

3x 4 unit buildings. Yearly rent is $93,900. Sellers want $1 million. They don't have P/Ls etc. They inherited from father and these properties are slum but in a great town where a SFH 2/1 800 sqft rents for $1100. I'm assuming $32,400 in expenses with a NOI of $61,500. So rents are low and could get up to $900/unit once some of the properties are updated/rehabbed. Could get average rent of $750 as is.

$1,000,000 PP; NOI=$61,500; 80%LTV 5.5%; DSCR = 1.13 (with a 5% reserve for vacancy)

- Issue would be getting a loan because it's below the 1.25 threshold; Thought about going to $1.1 Million and get $100,000 seller credit for repairs and up the rent within 1/yr

Within 1year assuming 90% occupancy:

NOI = $84,240 with an assumed value of $1.7 Million with a 5% cap rate; Generates just under $24,000 net cash flow (brings dscr to 1.55)

Ideal price I would like to pay is $750k but I don't believe that is happening.

[Chris Seveney]

@Susan Guzzo

Way too little information. Guessing on NOI and costs is a recipe for disaster. Also need to know overall condition of the buildings and how much $ is required to bring them up to livable standards

Based on comments of “slum” we took over similar project (3 quads) in Vermont and had to spend $100k per building to get them livable as had to install new heating, hw tanks, redo kitchens and baths and windows etc. Some units had to be completely gutted due to rats.