20 unit deal analysis in Wisconsin - specifically Waupun

[Dave Carpenter]

Good afternoon BP world. I have looked at a property that I am interested in offering on. I thought I would get some input from the group first. Here are the details:

20 total units in 2 adjoining buildings. One is 8 units, the other 12. Both consist of 1 and 2 bedroom units in reasonable shape for a 1960's building. Nothing fancy though. 

I have been through the property and nothing too scary was found.

• Owner is asking $815,000 for the package. 
• Current rent is $9588 per month at 75% vacancy
• Potential rent is 12,287 at 100% occupancy
• Expenses before mortgage is $6399 per month

The current tax assessment is $428,900 and has been for 5 years. I expect it to go up significantly after it's sold.

The seller has passed on offers under $750k so I think I will have to come in at least at that price. 

I will be using equity in current properties to fund the down payment and some repairs. 

All the information can be found at the link including rent rolls etc. 

http://www.crelisting.net/A1e3ePG3g

My first offer will be seller financing as it sounds like the seller may be willing to entertain that. I'd offer about $800k if he is open to fully financing the sale. 

If he is not willing to fully finance, this is what I am thinking:

$750,000 purchase price

$50,000 set aside at closing for deferred repairs including painting car ports, repairing parking lots, porch repair, painting vacant units, upgrading vacant units (including reglazing tubs)

10% second mortgage carried by seller to go towards down payment - buyer brings 10% for down payment

second mortgage at a rate of 4.25%

Amortized over 25 years with a 5 year term for first and second mortgages

Rental guarantee of 95% occupancy for 6 months. Total value at current rents of $2305.05 per month x 6 months for a total not to exceed $13,830.30

Inspection and Finance Contingency

Feedback is appreciated!!!