Asking for help analyzing this 18 unit multifamily.

[Steven Lalonde]

Hi BP,

There is a property in my area that I am looking into. Currently it is operating as a 18 unit motel (11 units + garage/storage area in one building, 7 units + laundry facilities in second building). It is zoned C-2B, tourist accommodation zone, which does allow long term rentals. I am interested in converting the motel units into long term rentals on a month to month lease, with a few units air bnb short term in peak seasons. The sellers pro forma states that 2018 income was $218,000/year with expenses at $145,000. Im not sure I believe the income, but that is heresay. The units are abit run down. They are liveable, but new flooring, trim and paint would help spruce things up.

For my analysis, I used some of the sellers pro forma info (as I have not fully accurately looked into items such as insurance, prop taxes, utilities, ect.) and used what I believe my numbers and annual income from rent/storage would be. The property is master metered, so the landlord is paying, what they say, is $25,000/year in utilities. Separating utilities would be a large upfront cost, however, utilities under master meter is approx $125/month/unit which would be in the range where normal utilities would run in my area.

Purchase: $625,000

Closing costs: $15,000

Down payment, 25%: $156,250

25 year, 5% interest

Monthly P I: $2740

Monthly income: $15,200

Monthly expenses: $11,715 (most numbers are sellers pro forma until I look more in detail)

Not accurate rehab quote at this point, but what I mentioned above, if each unit needs a facelift with flooring and paint, approx $5000/unit, close to $100,000 rehab budget would need to be expected. Some of the units there is quite a lot of deferred maintenance that the sellers have not addressed in the last 8 years of ownership.

Acquiring the property with numbers above, injecting $100,000 into rehab, what could I expect the ARV or value of this property be once renovating and fully stabilized with good tenants?

Would this be an investment worth pursuing?

Thanks for your time,

Steve