what do you think about this deal?

[Varinder Kumar]

I have an opportunity to purchase a 20 unit building.  Price reduced from 235k to 200k for a quick close. Needs about 100-200k in rehab.

Selling by owner

Building is vacant

Zoning – Commercial residential

Asking Price 200K-Clean title

Cap rate of around 33%

Lot Size 88x60

Public parking in front of the building

Repair estimate 100 to 200k

Loans are available from lenders

15,000 Square feet plus 5000 Square feet in the basement

$2,500 in property tax a year

Each unit has its own electric and water meter

1 bedroom apartments – 16

2 bedroom apartments – 4

Previous rent roll on 1 to 2 bedroom is $550 to $700

Potential cash flow of around $130k+ annually

$14k in annual operating expenses / Sewer $50 per unit which comes out to $1000 per month. Non-occupied units are $25 a month. Management fees average around $12%.

Occupancy is expected to be very high through the use of government programs* Rent is paid directly to the owner*

Owner has 6 tenants standing by with interest on these units****

Please help me decide how to go about this deal? I feel I could offer less due to the cost of repair. Need help on how to finance as well. 

[Mike Flatow]

Sounds awfully inexpensive for a 20 unit building. What is the appraised value? What part of the country is it in? Do you have experience owning/managing a building like what you're describing? Might not be ideal for a new venture.