9 Unit MF Deal

[Alex Flowers]

I've been doing some research on a 9 unit complex for sale. It's been listed for a year. It is a 6 unit apt building, a 2-story/2-unit building and a 3/2 mobile home on 5 acres with a pond. It is fully rented, and the tenants are a good group. Total rents are 4200/month. Tax is 1500/year. I did a couple of drive by looks and it is a nice looking property. I did some probate research and it shows the owner selling the piece 4 years ago for 208k on a VL with 10k down and the remaining paid at 3k/month. Needless ho say, within 18 months the foreclosure process was finished. The owner has extensive investor activity in the area, so I know he knew the novice would never be able to pay the payments. Now he is asking 295k, owner financing available. I would like to offer 30k down with 195k on a 5%/15 yr note. I am thinking he will reject, as he may be looking for another sucker to bite on the high payments and another foreclosure. Any thoughts? What info am I not including that would help?

[Aaron Montague]

@Alex Flowers

This deal looks good to me at $225k. It is probably doable at 295k, but not worth it. If the guy is just this side of a crook, then he'll reject any deal that would allow the buyer to make money.

Here are the numbers as I see them: (notes here)

Mortgage Rate 5.00%

Length of Mortgage in years 15

Monthly Mortgage payment $1,601.36 (195k principle)

Taxes $125.00

Sewer and Water $300.00 (I don't have a clue how much this costs where you are, but this is about what it would cost me to run 9 units)

Trash $200.00 (I have 7 units on a $150/month dumpster)

Heat/Utilities $- (Are there any common lights?)

HOA $-

Cap Ex and Ops $400.00 ($150 per month for each house plus $100 per month for the mobile home)

Insurance $132.50

Mgmt Fee $420.00 ( This is the BP standard of 10%. Honestly with rents this high, you could probably get this lower and still have a happy PM)

Vacancy $420.00 (Is 10% a good number for your neck of the woods?)

Total Expenses $3,598.86

Total Revenue $4,200.00

Cashflow/month $601.14

Cash on Cash Return 25.76%