Good Deal?

[Mike Roy]

Hi BP Community - I have an offer out on a fully occupied brick 4-unit building in Maine and would like BP's opinion on the deal. This is my first one, and I feel pretty good about my analysis, but I always appreciate a second opinion. Here are the details: Purchase Price: $180k Down Payment: $45k Gross Rents: $3,033 P&I (30 yr. @ 4.5%). $684 Tax: $445 Insurance $150 Management $304 Water/Sewer $85 Trash $85 Heat $250 (3 units on central heat, other pays on own) Repairs $200 Cap Ex $150 Vacancy $150 Total $2,253 Monthly Profit $530 Cash on Cash 14.13% I'm seriously thinking of separating the heat, despite the $5-$6k cost, and passing the cost to tenants. If I can pick up the $250 in cash flow, the new system would pay for itself in a couple of years, and then Cash on Cash jumps to 20%. What are your thoughts, and what am I not considering? Best, Mike

[Amy A.]

It sounds like you need the advice of a buyer broker.  One thing to keep in mind when changing the heating system is the market.  In the markets I know, Lewiston and Auburn, most tenants won't pay heat so you will not make your money back.  I've even had tenants balk at paying heat for a single family home (which, to me, their paying all utilities is the biggest advantage of renting a single family home.)