Analyzing First Multi Family Deal. 10 unit.

[Brian Himes]

   I have found a deal to possibly proceed on. Its a 10 unit apartment building with some issues. current asking price is 125K however im thinking they will take less. Im thinking given the size and state of the building each unit will take 5k to fix on average. Fixed up and in my area rent could run 400ish. I have experience with re-habbing homes so i'm not afraid of the work however ive never done multi fam so I want to have  everything checked out to make sure this deal isnt just me being obsessive and too quick to pull the trigger.

Also any specific advise on gathering investors for rehabs like this?

The Cons

Unit is made up of 1 bdrm and studio appts only, is this even worth it? Has anyone had sucess with these types of multifamily properties?

Obviously will need repairs (pic posted) Whats some common headaches in multifamily?

rent roll and and current numbers are not reliable.

Very possibly all tenants will have to be evicted.

Sorry for the non specifics as i said its my first multifamily

[Joel Florek]

@Brian Himes A few notes for you that I hope will be helpful. Always happy to get on the phone and chat if you want. I have 20 units at the moment between two different buildings.

1. Unit mix. 2 bed 1 bath units are always ideal in my opinion. Its nice to have some good 1 bed's in the portfolio but typically your just going to get a couple or a single person in these units. That's not a problem but since that's all your tenants it makes things difficult.

2. Property features. Based on the pictures what is the draw for someone to want to live here? Are the backyards nice? In your renovations could you put some sort of low maintenance bushes and plants along the front to make it look like people aren't just living in an old motel. Also, how are the units? I can imagine these are the roomiest of units. If the units aren't finished well or functional you are likely going to have a lot of turnover.

3. Calculate your NOI. Multi is all about NOI and cap rates. Given this looks like a C class property I would assume a cap rate of 10%. At $400 a unit your potential rent is $48,000. Assuming the 50% rule(generally you find the NOI is between 40% and 60% of total potential rent) you have an NOI of $24k. Your valuation would be $240k if performing well.

With all that being said if you are comfortable with the tenant type that will be in the building, confident you can keep it rented you look like you will be just fine if you can get the property for $100k. This is assuming your renovations will only require $50k total. You stand to have a $90k upside if you execute well and probably $1k a month in cashflow.