COLD FEET on a 10 unit deal

[Benjamin Haberman]

BP community,

Recently I was negotiating a 10 unit deal and got all the way to final contract revisions, and my partner and myself decided to stay put and not move any further. Part of me says I'm absolutely crazy for not moving further, then another part of me thinks we made the right move. We just bought a duplex for $90 that needs $50k Reno and will gross $2750. So on that deal alone we will be cash flowing around $1200 a month . The 10 unit was cash flowing $3,000 once up and running properly. It was crazy to think when comparing the risks, how less risky a duplex was vs the 10 unit (huge old building/a lot of operating expenses)The prior 3 years only grossed $75 k on avg which would mean we would lose in first year if it did those numbers. We were going to BRRRR a single family and a duplex to pay for the 30% owed for the 70% LTV commercial loan we got approved for (5 yr balloon-20 year amortization). Another issue I had was that we really were not factoring in property management which seemed a little sketch. One of the reasons was that the one tenant lives for free and collects the other 9 units rents and handles general maintenance on building. But that seemed like a huge gray area as well, which I don't know if I liked. Another thing that was bothering me was that we had to meter out every unit, which was going to cost use $30k. So with a $400 k purchase price we had to come up with $120,000 and then out of pocket $30 k for the metering out of the electric. I guess being such a newbie in big multi units, I felt this one was a lot to jump into for the first bigger multi unit in my portfolio. Can anyone give me their thoughts on this?

Would you of walked or would you of stuck around?

Another huge downer was the "current rents" didn't match up to the 3 prior years gross. However, the market rents/"could get" are right on with what they should be. 

Check out the google sheet on the property analysis, here:

https://docs.google.com/spreadsheets/d/1lKRGn3LQhs...