Do I want to be a Landlord, or not?

[Ronald H.]

Recently came across a Large, mixed use, residential, commercial unit and I found myself interested in it. I spent some hours analyzing it.

Sale price $$258K

NOI $57.3K/Yr

Expenses $46.2K Owner was sketchy on vacancy rates. Not verified. He did not include Office, Legal, Prop Maint, Snow Removal.

This owner loved to talk and I felt I had rapport going.

Owner needs cash, in order to be relieved from a 400K debt from a bank.

I thought about JV But I have no landlord exp. I have confidence in the financial side but not on the handyman side. "Fixing everything."

Could not flip due to price.

NOTE: I then got to figuring, could I do this? Do I want to do this? I can fix things, but I am not considered extremely handy, and with this property, I would be having to fix things, ALL THE TIME. Many units.

I find myself still wanting to do this, but I would need someone full time that could fix things like the toilets, the walls, the masonry. What would I pay him?

End result. I find myself wanting to do this, but a partner would be needed. Would a partner even do this with a newbie?

I thought about how to arrange a partnership with the hypothetical figures.

Partner provides the Cash in the tune of $258K. If we split the NOI at 50% each, we both earn $28,650/Yr

I provide the Management by keeping on the current owner at 8% of NOI for $4,584/Yr This $4,584 come out of my pocket. What should his duties be? Rent apts, fix minor things. He definitely won't do major things for $4.6K, so I would need someone to fix major things and pay for it out of my salary of $28.6K

I have stopped my due diligence on this, because it does not appear to be lucrative and I don't want to be stuck in a big multi unit, fixing things, or for that matter living there.

What about capital expenditures? Scenario: If I could live off of the $28.65K per year, AND there were no major property disasters, what time would I have to look for other opportunities? One major problem could require a Contractor at the tune of $70/hr plus material costs.

What method of property mgmnt would work here? Anyone see anything that I cannot see? The way it is now is "Too much work for little.

I am seeing approximately a 11.1% ROI for my partner with these figures. If the property manages to increase in value at 2% per year from its current appraised value of $300K and my JV agreement would be for 5 years, then I would need to save up enough to pay partner his initial investment, plus we would split the appreciated value. Am I way off?

Facts about the subject property

1. Motivated Seller

2. Price too high ( I think this answers my own question.) Owner tries to tell me it is worth a lot more, but it is appraised at $300K

3. Low Income housing. Most tenant's on SSI and SSDI. Rents are well below area standards. There are NO security deposits or last months rents to use for a deposit here.

4. Property is heated at the owner's expense. Owner claims the heat gets turned on in Oct and shut off on March 30th. I don't know about him but I would not be a happy tenant if my apt was 50 degrees on Sept 20th or April 3rd.

5. Owner seems to consider a very and unverified "Vacancy Rate" which I don't think sounds normal for those types of tenant's.

6. 19 Units, yet owner claims that he pays $200/Mo for electric. WOW, he trained his tenant's well.

NOTE: I have some cash and a life insurance policy that could have been used for a DP here, but I would not feel comfortable.

NOTE: I have a house now that I want to sell and it cannot qualify for bank financing, which means an Investor. I cannot extract any equity from the home probably because my credit is not great right now. So to use the house as a tool to buy an Income Property is not feasible right now, until it is sold.

My most comfortable idea would be to buy a cheaper home for my primary residence, and use any additional funds to start a "wholesaling real estate business" in my new locale. Somewhere where it is cheaper to live, like Ohio.