Existing Duplex, additional 2-unit potential

[Ian Turner]

Hi all, I've successfully completed a couple fix/flip projects to generate some cash I'd like to put towards a quality multi-family.  The inventory is very low for multi-family in my market but rents are good and in high demand with a quality, stable job base here in our rural community.

I have an opportunity to purchase a multi-family property from a gentleman who wants out of the business.  Here are the specs:

-  1960 construction, 4500SF total.  Former church with the upstairs newly remodeled and leased up at $1800 per month with excellent, long term tenants.

-  Basement is unfinished but has some existing plumbing, garages, finished walls,  etc. and I conservatively estimate $30,000 to build out each of 2 additional  units.  $60,000 capital improvement for a conservative $1400 in additional rents.  Once built out, I'd have a 4-unit with $3200+ gross rent.

-  Initial asking price is $250,000 but with zero to no comps around here, I'm struggling to determine if its a good deal.  My initial numbers indicate it is NOT a good deal for the existing use but with the value added building out the 2 other units it starts to look pretty good (negotiating point?).

-  Monthly Expenses:  taxes: $125, water/sewer: $150, garbage $50, insurance: $125, repairs 5% (newer finishes, metal roof), vacancy 5-10% conservatively.

-  I'd be looking at a conventional loan (possibly owner contract) with 25% down.  

What do you guys think?  How are my numbers looking and does this make sense?  I think he'll be willing to negotiate a bit as others who know him think he's asking too much in general (small town talk, people know people!).  The property is not listed for sale right now but I'd like to approach him with a fair offer that positions me well to capitalize on the value added through additional  units.