Deal or No Deal???

[Vince Futia]

Hello BP Community;

I have these two opportunities to purchase 2 properties.

They are student houses, both in excellent condition, no rehabing is required! Both have been placed through the BP Analizyer / calculator, over and over.

I would love to hear from anyone with expereince with this typoe of puyrchase. Your feedback would be greatly appreciated, that includes you Brandon Turner!

Property #1 is a 2 family 4br & 5 br; 2 newly remodeled kitchens, 3 bathrooms, new appliances. Asking price is $228,000.00

Figures: 3200 sq ft

Gross Rents:($1840 + $2250) / 4050/mo ($48,600/yr)                                                           

Expenses: Taxes actual 3920                                                                                            

Insurance: $100/mo;  Water/sewer $85/mo;  Maintenance (5%) $202/mo;                       Misc. (2%) $81/mo TOTAL MONTHLY EXPENSES $1,001/mo ($12,012/yr)

NOI $3,049/mo / ($36,588/yr)

Debt Service ($182,400 @ 4.25% - 30 yrs) = $897/mo ($10,764/yr)

Net Income: $2,152/mo ($25,824/yr)

Cash Invested: $45,600 down + $5,000 Closing costs - $8,100 security deposits = $42,500

Cash on Cash Return: $25,824 net income / $42,500 cash invested = 61%

Gross Rent Multipler ($228,00/$48,600) = 4.7

Cap rate ($36,588 NOI / $228,000) = 16.0

DEAL OR NO DEAL?

Property # 2 is a 2 family 4br & 4 br; 2 newly remodeled kitchens, 2 bathrooms, new appliances. Asking price is $220,000.00

Figures: 2500 sq ft

Gross Rents:($1840 + $1840) / 3680/mo ($44,160/yr)

Expenses: Taxes actual $4360.00

Insurance: $100/mo; Water/sewer $75/mo; Maintenance (5%) $184/mo; Misc. (2%) $74/mo TOTAL MONTHLY EXPENSES  $950/mo ($11,400/yr)

NOI $2,730/mo / ($32,760/yr)

Debt Service ($176,000 @ 4.25% - 30 yrs) = $866/mo ($10,392/yr)

Net Income: $1,864/mo ($22,368/yr)

Cash Invested: $44,000 down + $5,000 Closing costs - $7,200 security deposits = $41,800

Cash on Cash Return: $22,368 net income / $41,800 cash invested = 54%

Gross Rent Multipler ($220,00/$44,160) = 5.0

Cap rate ($32,760 NOI / $220,000) = 14.9

DEAL OR NO DEAL?

[Ahmad H.]

@Vince Futia I think you have to budget 14% for maintenance for student rentals and also budget 10% for vacancy.  Another concern is the Albany grouper law that forbids housing more than three unrelated tenants. You might want to look into that, it might not be an issue since sororities are currently renting the units but what if they move out. If you cannot put 4 and 5 students in the units your rents will be a lot lower.

What is the Grouper Law? In the City of Albany there exists a zoning ordinance which has come to be known as the so-called “Grouper Law.” This ordinance only permits four or more persons to live in any dwelling unit if they are members of a traditional family or the functional equivalent of a traditional family. Specifically this ordinance states (Family Definition; section 375-7 zoning ordinance):
FAMILY
1. Shall mean

1. one, two, or three persons occupying a dwelling unit or
2. four or more persons occupying a dwelling unit and living as a traditional family or the functional equivalent of a traditional family

2. It shall be presumptive evidence that four or more unrelated persons living in a single dwelling unit do not constitute the functional equivalent of a traditional "family"

Therefore, three unrelated persons occupying a dwelling unit is the maximum allowed by this ordinance.