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Updated over 5 years ago, 06/21/2019
Fourplex. Need guidance.
I'm considering making an offer on a 100% occupied fourplex in a class b neighborhood. (2) 2 BR and (2) 1 BR. I'm in commercial real estate so SFH and residential in general is a bit outside my comfort zone.
Current ask is about 215k. Haven't walked the units but pictures look great. Would like some feedback. Details below:
2018 OpEx:
Insurance: $4620
Property Tax: $3360
Water Gas & Trash: $4500
Electric: $600
Cable: $1500
Lawn Service: $900
Total: 15480
I added a 2% growth rate on the operating expenses and a 6% management fee on top of that for my as-is analysis. Incorporated a 5% vacancy. Expenses as-is would be about $17,821. NOI on these numbers is $14,099.
I'm pretty confident in my numbers, but think there's a ton of room to cut expenses. Tenants pay for own electricity. I assume the electricity charge is for the washer/dryer in a storage shed behind the fourplex that is available for tenants.The units are sub-metered, but for whatever reason, current landlord pays for water and gas as well. He also pays for cable which seems generous. I'm not sure if current tenants are MTM or yearly leases, but upon renewal, I have a few ideas.
1. Bill tenants directly for water & gas.
2. Not pay for tenant cable.
3. Rents are below market, but with the changes above, I'm thinking keep the rents as-is to prevent scaring off the tenants.
As current numbers stand, I'm planning on making an offer at about 85% of ask. If I feel confident that I can make the changes above, I'm comfortable offering about 95%. Are my proposed changes too aggressive/optimistic? Thanks in advance for the help.