First time purchasing a quadraplex

[Derrick Jordan]

Im looking at purchasing a quad that listed at 45k but needs total rehab. I know this price is too high. Im want to offer 20k owner is willing to finance.  they are efficiency units 250 sqft. that will cost about 11k per door to rehab. I think i can get at least 275 to 320 a door. I asked a friend about it and he said it not a good deal.  What factors am i not considering?

[Hattie Dizmond]

A quad still get's evaluated like a SFR. So, those numbers would put you at being into the property for about $64k, not including fixed costs & holding costs, prior to occupancy.

What is the ARV on the property? How confident are you in your rehab estimate? What would your terms be on the seller carry?

You're only going to get (mid-point) $1200/mo total for the place, and that assumes full occupancy. 

For me, this property raises some red flags...

1.  250 sqft efficiency units are likely to be occupied by transient types, which would lead to high turnover and frequent periods of vacancy.

2.  These types of units, typically, don't attract the highest quality of tenants, so you would likely have to have a higher reserve for damage.

3.  I'm guessing this is also not in a prime neighborhood, so you have environmental issues and/or expenses to worry about.  Additionally, is the neighborhood declining?  Are you going to be able to get out of this property, if it becomes unsafe?

If you can account for all of the expenses & issues, and still feel confident you can cash flow this property over the course of the next several years, then go for it.