Negotiating a 5 unit building

[Account Closed]

The seller is asking for 800k on a 5 unit building.

- 2br 1bath 1300

- 1br 1bath 1250

- 1 efficiency 950

Rents are low. In a great neighborhood

At 800k the property doesn’t cash flow. What is a good price number to make this property cash flow?

[Evan Polaski]

@Account Closed, as others mentioned, not really enough info, but on a very back of the napkin analysis, that is too much.  If you go by 1% rule, you are at about $600k, but that is not the smartest way to analyze a deal (kind of works for single family, in my opinion).  

Does landlord pay water or gas/electric?  Is there a lot of deferred maintenance?  A lot of common area you need to maintain?  What about landscaping, snow, trash?  Is this a high real estate tax area, or generally low?  Are you in a floor plain with increased insurance expenses?  Are you able to get good financing, or will this be a hard money loan at 12% interest?  Is there room to grow those rents?  Is the area rough, up and coming, or very stable?

All of these items should be assessed.  First look at the area in general.  I assume this has already passed, since you are considering it, but you should feel comfortable with the area if you want to buy there.  Then start penciling in numbers.  Your return threshold, risk tolerance, portfolio make up, etc are different then everyone else's, so we can give tips, but can't decide for you.