Need Help Evaluating A 9-plex

[Stanford Neal Mead]

Good evening, BP. My wife and I need some help evaluating a potential investment property in my old hometown. Here are the basics, please let me know if you have any additional questions and I’ll do my best to answer: 227k purchase price, 9 units, 4800 gross monthly rents, needs 60-70k in repairs, 350k ARV, the possibility of additional income from an on-site coin-op laundry facility ($250-300)... those are the nuts and bolts. We’re considering an FHA 203k rehab loan, and are planning to self-manage initially. Please let me know what you think!

[Ben Leybovich]

So, this is a much longer conversation that we can have here. While some folks are saying that no opinion can be rendered based on insufficient data, I think there is more than enough info to walk away.

$4,800 of GSR is $533/month per unit. There are 2 truths relative to this:

1. If the most you can get is $533 this is not an economically stable market, which means you will have trouble both driving rents higher and driving valuation higher.

2. $533 is not enough to cover OpEx, CapEx, Debt Service, and Profit. The numbers are pretty consistent on that.

Combination of these two points leads to disaster over time.

I don't think this is a great deal :)