Would you Buy this 4 Unit Buillding?

Question

I saw a 4 unit 2/1 each unit building for sale for 300k in Baltimore, MD. I went back and forth with the seller and finally gave me a asking price at 300k. Obviously that's to high for the area but what would you offer if they said what would you pay for it (That's what they said to me)? I personally would like to buy it but the price is way to much. They seem not to know how much its worth by not placing an asking price. Anyway here is a link to the property

https://baltimore.craigslist.org/reo/5073938028.ht...

DISCLAIMER: THIS NOT MY PROPERTY. I AM NOT TRYING TO GET IT. THIS IS ONLY TO GET HELP WITH KNOWING WHAT A GOOD DEAL IS AND HOW TO CREATE ONE

https://baltimore.craigslist.org/reo/5073938028.ht...

DISCLAIMER: THIS NOT MY PROPERTY. I AM NOT TRYING TO GET IT. THIS IS ONLY TO GET HELP WITH KNOWING WHAT A GOOD DEAL IS AND HOW TO CREATE ONE

Roy N. · Answer

There is insufficient information here, or in the advertisement, to determine if this is a deal or not.

In what kind of neighbourhood is the building located  {A, B, C, or D}?

What are the financials (rent-roll, operating costs, etc) for the past 2-3 years?

What are the {economic} vacancy rates for the building and neighbourhood?

What are other 4-6 unit buildings in the neighbourhood commanding for value?

What are the operational finances like for the building?

What recent CAPEx improvements have been made? Based upon the pictures, not many.

What are outstanding near/midterm CAPEx investments necessary? Based upon the pictures, plenty.

I could go on ... but I'm sure you get the picture.

Nancy Roth · Answer

@Shaniqua Dupree

Help me understand why this is obviously too high for the area. That is in a very nice neighborhood, did you drive by?

In any case you are going at this backwards. What do YOU want? What do YOU need? What would you need to do to make money on this? How much money could you put in, how much could you finance, what do you need to get from it?

A rule of thumb some people use is to aim for a monthly rent that is roughly 2% in of what you pay for the unit. So if you are paying 75K/unit you'd want to aim for a rent of roughly $1500 per unit/month.

How much rent are the tenants currently paying? Are these market tenants? Voucher tenants? How regularly and promptly have they paid their rent? Will the seller show you a rent roll? Have you looked up what the units would fetch on the Go Section 8 Baltimore website? What are the property taxes on these units? How much will insurance cost you?

The answer to what makes a good deal is found in the answers to questions like these. If the tenants are paying the right amount of rent and have a history of on-time payment this may be a good deal, even if you can't afford it.

I would like to encourage you to start going to some landlord meetings so you can learn how to work out problems like this. I strongly recommend the Baltimore REIA landlord group the last Monday of each month at the Dockside Restaurant in Canton. Also the Savvy Women's investment group on the first Wednesday of each month. Go to the BREIA website for the calendar.

Good luck,

Nancy Roth

Kyle Gregg · Answer

I was considering buying a 2 unit property not to far from the lake. Its definitely a nice area.

Have you brought a contractor through to see what it might need in terms of rehab? He might be able to spot some things out that you might not have noticed which could help drive that asking price down. You dont want to drop this amount of money just to find out that the roof leaks and you have a serious mold issue in your attic...

Nancy Roth · Answer

@Roy N.

Your contributions were helpful to me as well, especially about the windows and doors, and of course a buyer would want to do all the due diligence you mentioned.

Speaking as someone who has tramped through a ton of kitchens in Baltimore, though, I'd like to add FWIW that this is by no means the worst kitchen I've seen. Many Baltimore rentals would run profitably for years with kitchens like this one, that is, functional and basic, though not stylish. That's true even in the nicer neighborhoods, including this one.

Many thanks for your thoughts,

Nancy Roth

Mohit Madaan · Answer

Thank you Sir, this is exactly what i was looking for

Roy N. · Answer

Mohit,

Windows (sliders) and doors are what initially caught my attention.  Sliders are the least efficient and most draft prone style of window and the back doors look to be original, non-insulated, with lights.

The appliances are also dated, so would need to be reviewed w/r to functional performance and efficiency.

The kitchens look to be dated and would need to be examined more closely to determine if/when one should plan to begin replacing cabinetry and counters.

The exact determination on the amount of reinvestment would be driven by how one runs their business and the type of neighbourhood (A, B, C or D).

Mohit Madaan · Answer

Can you please get into a little more detail on these two? What do you see in pictures that suggest that there are near/midterm CAPex investments needed?

Chuy Gonzalez · Answer

My point of view is distorted because I'm from overpriced So Cal...but the building looks good, its HUGE, and it's only 300k??

It looks like there are rentals all around this building so getting comps wouldn't be difficult.

Would you Buy this 4 Unit Buillding?

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