First Multiplex property purchase

[Joey Wharton]

Under contract for a 6 unit complex in high demand location where rents are rapidly increasing. Purchasing from an estate. Property on market almost 200 days, price dropped from 225k to 195k in December, got it under contract for 158k, with quick 2 week close. During our first round of negotiations it came to light that the property was uninsurable until roof got replaced. Estate couldn't find any insurance policy and they currently have 2 tenants, they had another lowball bidder, so we lowballed with 2 week close figuring they were ready to dump it and the strategy worked.

Downside, building has been neglected, units need complete rehab and we won't know full extent of repair until we tear into walls, which is a must in order to fix sagging in floors along center. Had engineer and foundation company inspect, both said foundation was good.

Estimate 60-70k in complete rehab costs

ARV 320-340k

Projected cap 13.5% 

Private lender at 6%, no fees

24% downpayment from personal funds

Final plumbing & electrical inspections tomorrow

I called city zoning, turns out we can build another building and add 10 more units. My agent sent me this listing. It never came up in my searches.

Plan is to get current tenants out ASAP. Rehab and have 100% rented in April, then get a commercial loan to build additional units.

Currently I have a SFR also good location, premium rent, 3 miles from this property. My business partner has a condo and storage units he's done well with, but this will be our first "professional" deal. We recently partnered for real estate investing, were under contract for a house flip but decided to walk away.

We've done a thorough inspection of the "bones", tomorrow is really focusing on mechanicals, electrical, plumbing. Is there anything else I'm missing?

Got insurance quotes (after roof replaced)

Got roofing quotes, costs built into rehab costs.

Any advice?

How does the deal sound?