Input desired on a potential 4-plex purchase

General Landlording & Rental Properties
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Input desired on a potential 4-plex purchase

Eric Knapp
Investor · Millport, NY · Member since 2011 · 39 posts · 12 votes

I would like to hear some insights from experienced landlords.

I currently own a duplex and a SFR as rentals. They were both very distressed properties that I rehabbed myself from the ground up, all new utilities, windows, insulation, drywall, fixtures, floors, etc. Although I used materials and methods designed to be economical, I have always insisted on a quality of work that would be acceptable to me if I wanted to live in them. I have been happy with the work, and they have been reasonably profitable.

Now I have an opportunity to buy a 4-plex that could be quite profitable. It is in a nice village in a fairly rural area. More single family OO homes than rentals. It is currently fully rented with 6-month leases. Monthly rents total $2100. Insurance $1100/year, water $60/month, taxes $3100/year. Tenants pay all other utilities.

Here is the thing I have a hard time digesting. It is a house that is just kind of ugly inside. The foundation is in decent shape, but it is old and has settled a little over 150 years, so floors have some slope to them that would be hard to fix without a huge effort. Floor plan is boxy and unattractive. The long and short of it is, it will be profitable rented as is. As units are turned over, I can dress things up a bit, but a complete gut and rebuild would not be profitable. New roof and vinyl siding and windows in place. Wiring is modern.

So, economically it looks good, if I can get over an uneasy feeling of feeling a bit slumlordish with the building. Tenants will always be from a little differnt circumstance than what I am used to dealing with- I am not saying bad. It is more that I am used to feeling proud of my rentals, and finding tenants that are proud to be renting the places.

I apologize if I sound really foolish, but I am struggling to get my head around this.

Thank you.

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    13y

    The house being over 150 years old is what would really scare me off.

    Is the property sitting on a good chunk of land?? This way if the building became a money pit you could just get the tenants out and sell the land off for a profit and someone else could demo the house if in a path of growth.

    That age of a house there could be very expensive issues that could rise above the stated purchase price fast. You do not want a bad investment to have a neutral affect on your other investments (portfolio averaging). You want all of them to be good so you create maximum momentum in your income streams.

    Maybe if you negotiate enough of a cheap price wholesale it to someone else and let them take the risk. Sometimes there are deals that are too much risk for yourself but someone else would love to buy. That is where the assigning or wholesaling comes in.

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  • Eric Knapp
    OP
    Investor · Millport, NY · Member since 2011 · 39 posts · 12 votes
    13y

    Thank you, Joel, for your POV. It is funny, but the age of the house is the one thing that doesn't directly bother me, as every house I have owned or lived in has been at least 100. The psychological issue I have is that it is more of a lower end quality of rental and I don't feel completely comfortable with that. Because of how it is laid out, it would be difficult to make really nice. It is safe, utilities are up to date.
    That being said it is a large lot in a nice village and could have other values to myself or someone else. I am just really having a tough time sorting out my feelings, as opposed to just doing the math.
    Again, thanks.

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  • Tevis Verrett
    Lender · Woodland Hills, CA · Member since 2013 · 364 posts · 115 votes
    13y

    Morning Eric Knapp!

    First, Joel Owens is a very wise brother, whom I follow and I would only be parroting EVERYTHING he has just said.

    With that, here is my .02. . .

    I am a big teddybear and usually lead with my heart on most things. . .until it comes to real estate!

    This is about the math, then it is about the math, and after the math makes sense. . . you can then be a big emotional teddybear bout the property.

    At some price, this becomes a viable and cashcow, moneymaking vehicle.

    Get a foundation contractor out there and assess the rebuild cost on the property, electrical to look for any Knob and tube wiring, and a plumbing contractor to discover water pressures through the properties.

    Also, have you thought about Section 8 landlording? You can be the attentive landlord v. a slumlord. . .

    After you score a wicked good deal, buy all of us a beer and pizza and we will give you a bunch atta boys!

    That always feels good!

    Blessings on this Sunday,

    Tevis

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  • Eric Knapp
    OP
    Investor · Millport, NY · Member since 2011 · 39 posts · 12 votes
    13y

    Always good to "hear your voice", Tevis. Good, positive energy there. As you say, "if the math works." It appears it does - I am just stretching into unknown territory a little bit. Have done Section 8 - fairly good experience. I am going to dig deeper, and seriously consider making a deal.

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