Looking for advice about purchasing a 7 Duplex Portfolio

[Douglas Montgomery]

Alright people I need your help. I found this deal on the MLS. The realtor is the son in law of the seller. I went and looked at the 3 vacant properties and believe the rest are on the same quality level. The 3 I looked at probably need 5k a piece to get them rent ready. The other 11 have year or less old tenants in them. They don't have rent rolls but did send me a list of the properties with the monthly rent charged for each unit. the average is $465.00 per and also an expense sheet.

They are asking 475k He hinted that an offer in the low 4s would probably get it done.

Expenses are 1200 per year

Taxes 7000

Current Revenue 5115 

The banker I typically use offered me a 5.25  25 year AM using one of my other properties equity as a down payment.

What do you think and what other information do I need? 

[Erik W.]

Not enough information to make a final decision yet, but I'm not at all excited about something that would cost $420-$430Kish to get into and then require another $70K (14 units * $5K) to rehab.

The rents to all in cost are too low, for one.  If I've figured the numbers correctly, it sound like you're barely surpassing the 1% rule.  Unless there is a large, quick potential for appreciation or raising the rents in the next 6 months I think you're going to be paying out of pocket monthly for the privilege of owning them.

The expenses ($1200...is that per YEAR or per MONTH) seem low (if per month) or absurdly low (if per year).  Expenses, even in well-maintained rentals, consume roughly 30-45% of the gross potential rent.  So in this case, you should be seeing about $1700-$2200 per month or * 12 that much per year.  Remember to account for management (10%) and capital expense set-asides (minimum 5%...8% is better).  Most mom and pops don't include those as expenses, but they are real costs.

More info, please.