Deal Analysis: 22 Unit multi-family

[Harrison Ojimma]

Good evening guys and gals,

I have a deal under verbal agreement at the moment until all the details are hammered out and I need some of your thoughts on it. This would be my first multifamily deal

Details of the property below;

• Number of Buildings: 11 buildings, plus 5 empty lots (potentially build more units in the future)
• Number of Units: 22 units
• Agreed Purchase Price: $132,000 CASH
• Repair Cost: $120,000 - $140,000  (**contractor priced repairs of each unit at $10,000-$11,000 per building - includes labor and materials**)
• Current Rent per Unit: $350/unit
• Gross Scheduled Monthly Rent: $7,700
• Gross Scheduled Yearly Rental Income: $92,400
• Current Vacancy: 87% (Only 3 of the 22 units currently occupied)
• After Repairs
• Rent per Unit: $425 - $450
• Gross Scheduled Rent Income: $112,200
• Operating Expenses: $33,660 (garbage $2,000/year, electrical cost $200/year, water and gas on individual meters)
• Net Operating Income: $78,540
• Cap Rate: 9%
• **part of the repairs would be to convert all units from gas to all electric. 

Plan and Exit-Strategy

Plan is to finance the property with a hard-money loan (purchase and repairs). Value of property after repairs and 95% occupancy will be roughly $872,000. Exit Strategy would be Cash Out Refinance the property 12 months from purchase date.

Please offer any thoughts or advice or questions on this deal that would help me. I have attached pictures as well so you can see the condition. 

[Greg Dickerson]

@Harrison Ojimma from the looks of the property in the pictures and your comment about converting to electric you will likely spend $30k or more per unit to get this property in to shape. 

Also your operating expenses will be double what you are estimating ton a property like this. You need to factor taxes, insurance, repairs, maintenance, vacancy, bad debt, CapX reserves, etc. Lower income properties like this generally run 55% or more operating costs.