9 unit propert owner financing

[Jeffrey Edmiston]

So I found a property that I’m curious about. I don’t think I am in a position to buy it but I’m very curious if it is a good deal, so that if in the future I come across something like this again, I would be better informed to possibly move forward. Thank you in advance for any help!

Property is 2 separate buildings on 1 lot/deed

Corner lot on heavily trafficked main rd

2-4 miles from expanding college university

1,100 rentals in area and 3,300 renters aprox

Which is struggling to keep up with the demand for rental properties.

1st building has 7- 2 bedroom 1 bath apartments. Tenants pay electric and possibly gas

2nd building is a twin with 2- 3 bedroom1 bath units. Tenants pay all utilities inc water & sewer.

The taxes are $11,505/year

Tax assesed at $300,000

It’s rent controlled

100% occupancy

Built 1900

15% cap rate

Property has newer roof

Asking price $699,000

Owner wants to do owner financing

I have no info on what the current rents are but I’m pretty confident that end rents could be

$1000 per 2 bed 1 bath units ($7000 total)

$1200-$1300 per 3 bedroom 1 bath units possibly more. I’d say these numbers are conservative. ($2,400-$2,600 total)

Estimated income potential $9,400/month

I’m am new & learning so I don’t even know how to properly analyze this property. I am unsure of the overall condition of the building & inside of the units because I am just going off of what’s written on the listing. My goal is to better understand how to assess this property and know if it seems like a good deal or not. Again, thank you!

[Nick Schoch]

It looks like the actual rents are below the median market rent. Assuming the property is comparable to the average market property, you should have room to increase rents over the first couple of years. These increases will be capped at 4% per year by the local rent control rules.

If you want to get an idea about turnover in the subject property, you can ask the seller for a rent roll that shows the move-in dates for the tenants. You'll see quickly whether the tenants stick around or if they're all new. The latter implies regular turnover unless there's a story like recent renovation.

I would also talk to the tenants before you buy the property. Ask them how they like living there and if they have any issues. This might provide clues about maintenance problems or other issues.

I would also get a property condition assessment by a reputable firm to give you an idea what kind of maintenance will be needed over the next 5-years. You will want to know if the furnace or boiler needs to be replaced in the next 12-months.

Seller financing is usually a good way to go since it is less hassle, but it could cost more. I would consult with a mortgage broker to help you compare the seller's terms to market. Many brokers will be happy to talk to you at no charge provided they have at least a chance to win your business if they find you a better deal.