Midtown Atlanta Multi - How Did We Do?

[Colin G.]

Hello BP

I would love for some more experienced REIs to have a look at the details of a recent purchase my partner and I just completed and give us your thoughts on how you think we did.

THE PROPERTY

The property is a 2 story 4-unit brick multifamily with a basement in Midtown Atlanta. The units each have identical floor plans with 856 sq ft of living space and screened in patios. The property includes a fenced-in back yard and an adjacent parking lot for off-street parking partitioned for 9 cars. The property is a double-lot on a street of single-lot SFRs and MFRs. This provides for the potential to develop what is currently a parking lot into a second income property (long-term goal).

THE PURCHASE

We paid $119k (25% down on a 30yr fixed @ 4.75%) on a purchase price of $476k. This was negotiated down from the $565k asking (it was flat out over priced).

The seller covered all closing costs, reimbursed all of our prepaid items (appraisal, home inspection, land survey, etc.), and covered some of our first year expenses (insurance, termite re-treatment and warranty).

THE INCOME - $3820/month

3/4 units is currently renting at $910. The 4th is at $940.

4/9 of the parking spaces are provided for the building tenants to park 1 vehicle each gratis.

3/9 parking spaces is currently rented at $50/month (charged quarterly) to a neighboring building's tenants who want off-street parking. The remaining 2 spaces are not currently rented.

THE EXPENSES - $3447.32/month

Mortgage - $1862.28/month

Utilities - $387.45/month - I'm starting to recoup water by billing back to the tenants with the new leases. This will reduce this figure by $200/month.

Taxes (City/County/Solid Waste) - $548.94/month

Insurance - $98.50/month

Other Expenses (Vacancy/Repairs/Maintenance/Services) - $550.15/month

BOTTOM LINE

What it looks like now is that before we even bring this property in line with the rest of the neighborhood and up to its full potential, we're already looking at a cash flow of $93.17 per unit per month. Our expectation based on increasing rents (the property is already below neighboring properties in the market) and billing water back to the tenants (something many other properties in the market already do) is that we can push that number to $208.17 per unit per month by this summer when 3/4 leases turn over and $230.67 per unit per month after.

CONCLUSION

I feel like the rules of thumb (50% and 1%) would have lead some investors to walk away from this listing so I'm curious to know how the community feels about it now that all the cards are on the table.