THOUGHTS ON THIS 10 UNIT AND NUMBERS

[Henry R.]

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Hello BP Nation,

I would like your thoughts on this please.

I took a look at a 10 unit for the first time. It's a brick building built around 1920. It has been rehabbed some time ago has sheet rocked walls, breakers, carpet, etc likely completed in the very early 90's. Needs some work to 3 of the vacant apartments. right now rents are 4500 per month fully rented 6500K per the owner this is accurate. 5 units are 2 bed rooms, the other 5 are 3 bedrooms. Rents are a little low from 650 to 750. Outside needs some brick work in a few places (pointed up).

Tenants pay own heat and electric ( forced hot air) Flat tarred roof. The cashflow is low for me at 1300 or so. Good connection with the owner wants to sell to to do other things, no time, tired etc. Mention a few times knows it needs work would like to get 350-400K, however I would not pay 350K. High taxes and water/sewer. The numbers look great, however I don't really like the overall numbers. 

Am I missing something?

Thanks!

 input by the member who posted.

[Jaysen Medhurst]

@Henry R., I think this looks pretty good, assuming there isn't a lot of deferred maintenance or CapEx items that need immediate attention.

That being said, there will be something that needs attending to and I think your $3k for initial repairs is optimistic. I'd figure $15-25k at the very least to get the 3 vacant units rentable, attend to the pointing, and miscellaneous repairs.

The Cash-on-Cash return is great as it stands. If you can bump rents by $100 that would be great. I think you need to adjust some of your numbers, though:

1. Vacancy might be a touch high, but this is super local.
2. I feel better with Repairs and CapEx at 7.5% each.
3. The taxes are very high. Have you confirmed them with the town? What's the town's appraisal? Is there any room to challenge?
4. Is there anyway to charge back the water and sewer? This would really make your return shine and add $50k+ of value right out of the gate.
5. You should expect at least $4-5k in closing costs.
6. The loan terms you cite are unlikely. For commercial loans, I'm being quoted 20-yr at 5.5%. You might be able to find a 25-yr at ~6%. Call around to your local banks. This will bump your monthly P&I by ~$340.