2 family in Princeton Heights

[Kyle Eckert]

I have the ability to buy a 2 family in Princeton Heights (On Rosa Ave) with the seller saying that he would be willing to seller finance.  Rent for a finished 1BR in this area could be $700-$800, so I would think $1600 as max in the short term.  It has a garage as well, so it could generate garage access income.  I would inherit 1 tenant renting at $500/month.

Building details:

1000 sqft per unit

Exterior is brick, pitched roof.  2 story sunporch on the back needs siding repairs.  most other things look good roof is recent.

Garage needs a new man-door and a garage door opener.

1st floor is occupied.  The place smelled very bad but couldnt be smelled outside or upstairs.

2nd floor needs paint, minor wall repairs, kitchen floor, etc.

Basement is dry and will need to be cleaned out.  Storage could be built and sectioned off for possible additional income.

HVAC are less than 10 years old.  Electric water heaters look fairly new, but are dated 1994. 

How would you structure this deal?  What would you pay?

[Kathy Henley]

Princeton Heights is family friendly, lots of SFH with a sprinkle of duplexes. Local expectations are that the storage areas in the basement will be free and that the LL will pay the water bill. Garage rent may be $50/ garage door. Pitched roof is good, no standing water to rot the surface. 1000 sqft units are huge! Have you been inside? Any way to add a closet and make a room into a second bedroom? Two bedroom apartments stay rented longer. The seller financing option is terrific. Take advantage. But first, what is the property worth to you? @Kyle Eckert  Are you going to hold it for a while? Will the rents cover your expenses? BP has a nice property analyzer that you may find useful. I have my own.

The brick buildings of St. Louis have given me grief because of tuckpointing, refreshing the mortar between the bricks. Run your finger between the bricks and see if the sand of the mortar trickles away or feels solid. Look for irregular lines of bricks, especially under the windows and yucky looking ceilings inside, as a sign of negligence. I have been hit with thousands of dollars of tuckpointing repairs. The better buildings have been re-tucked every few decades.

Ignore the 'could be' rent, base your offer on the actuals, $500 + $700 (my estimate) = current income.  If you improve things, YOU get the increased equity. Figure an 8% vacancy rent, when determining the annual income. When will the lease be renewed? What will it take ($) to get to the top of the market rent? Water heaters typically last 15 - 20 years. Are you looking at the original windows, or will they need replacing in the future? Your offer will reflect your future needs.  Owner financing must please the needs of the seller, lump sum now or later, plus the monthly payments which you two work out to please you both.