Just closed on 14 plex

[Wade Sikkink]

Hi BP Nation,

We've just recently jumped back into REI. We had previously owned a 4 plex, which was a overall good experience, so we were looking to move up to something bigger. We found a 14 plex that was just coming on the market and were able to move quickly. Here's the details:

14 plex, 7-1bed and 7-2 bed. Built 1973. Located in a bedroom community about 15 miles from Lincoln, NE. Overall rental demand is very high in this area and an excellent school district. This property is very unique. It's the only apartment building in the community. Only other multi-family available is duplexes at significantly higher rents. Current zoning will not allow a building like this (3 story apartment building) to be built again. Building has nearly 100% occupancy history in last 3 years. Seller has been raising rents during that time and we will be able to continue that trend. Excellent condition structurally. New roof 2 years ago with 8 years remaining on roof warranty. Coin op laundry in basement. Needs TLC and cleaning up but most everything is cosmetic. Probably $5k in deferred maintenance to really get it in great shape. Seller is 82 years old and just wanted to be done with rentals.

Seller was asking $370k, we offered $335k to take it "as is" and he accepted. Monthly income with rents, utilities that we meter and charge for and laundry is currently about $7800. Financed 75% on 20 year note (the shorter note raises the monthly debt service, but will build equity faster). Using the 50% rule it should have an NOI of about $1200/mo, which is not quite $100 per door. However, based on actual maintenance records and operating expenses for last three years we should be able to do better than that. Even at $1200/mo that's 17% return on invested capital. As we raise rents that number will go up and I plan to add a soda vending machine in the basement next to the laundry area (any advice on that idea would be appreciated).

I think this was a home run, but I'm interested in what the community thinks.