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!!!

[Peter B.]

I looked at a very similar building in Wautoma last year (it also had new boiler and new roof). It was fully occupied and sold for less than 30k per unit....I bought a  modern twenty unit complex last year in Waupaca. 36k per unit. 3 other modern complexes in my area sold last year for less than 40k per unit.. My point is this will not sell for 800.. So let it sit. The 70k exspenses (my 20 unit is about 63k) seems high. So I would go through and see what you could improve there. I wouldn't give up on it, but it isn't worth any where near that.

Peter