28 Unit Row House Building

[Matthew T.]

Hi, so I'm starting to do research on moving into smaller apartment buildings when this one caught my eye. I have a few SFH rentals, but no multi families.

It's a 30 unit row house building. Built in 1899. The exterior of the building is in good condition, all brick, wood in good condition. A small handful of windows that need to be replaced. Only 8 units currently rented and the rest need varying degrees of remodeling. At least 4 more could be ready in a week. All units are 2 bed 1 bath and can rent for $450/month, maybe a little more. The units are all large apartments, some may be able to convert to 3 bedrooms. Only street parking, but it does have an interior courtyard that could potentially be parking for 8-10 cars. It does have a central laundry area as well. 

Asking price is $250,000. So 20 units need remodeling, but a small handful only need paint jobs and some minor work, while 10 of them need completely remodeled.  I've done remodeling before, but for a project on this scale I'd likely contract out much of the work. Do you guys have rough estimates for remodeling 850 sq ft 2 bed 1 bath units. I plan on remodeling them toward the lower end, nothing fancy. 

Income $12,600. 28x$450. Not including laundry income. I could see us getting $495 for the completely remodeled units, especially if we add the additional parking. The location is downtown on a fairly busy main street about 3-4 blocks from major employers. 

Annual taxes $6,000

Insurance $7,000 ($250/unit)

Maintenance $28,000 ($1,000/unit)

Utilities $16,800. Water and trash. 

Vacancy $7,560 (5%)

Capex $15,120 (10%)

Contract services $4,000 (pest control)

Management $7,560. I will self manage, but saw that most people recommend calculating this anyway. 

I based my numbers on research done through bigger pockets. The taxes are based on the sales price. Due to the age of the building I put maintence at $1000/unit. 

I try to be fairly conservative, I hope to get higher rents and hopefully maintence will be lower. It will all be personally financed. I may have to take out an equity loan for the remodeling. 

[Brian Ploszay]

Looks cheap, but that depends on which market this is located.  Probably not Chicago. 

[Matthew T.]

Originally posted by @Brian Ploszay:

Looks cheap, but that depends on which market this is located.  Probably not Chicago. 

 Not Chicago, smaller midwestern city.

[Matthew T.]

[Brian Ploszay]

Still looks ok.  Areas to be careful - make sure there is depth to that rental market.   Smaller cities "vintage" areas are often not desirable.  Again make sure there is depth to the rental market.  

[Oleg Shalumov]

@Matthew T. I would agree with @Brian Ploszay here - the rent is very low so make sure you are familiar with the area very well and confident on the rent. 

[Eric M.]

My only response was your comment that due to the age you put maint at 1000. Without seeing the building but seeing 1899, I would have thought a multiple of 1000. But who knows when the last work was done and how good the work has been over the years. It is possible though that you have decades of questionable remodeling on top of very decayed foundation and walls....or it is possible you have a solid building. But if the landlord is getting 450 a month, I don't get the impression he is doing much quality maintenance over the years.