6 unit multiplex, $300K - Next steps.

[Alex Chin]

Hello BiggerPockets,

I'm looking for a little advice from experience multi-family buyers on a potential deal that I found. It has passed the initial filters I use (1% rule, 50% rule, major city, under $500K) and I am taking a harder look and would like to know what steps you would take at this point. Keep in mind that I have never bought property before, I am a relative new-comer to the real estate investment scene.

I have found a property on the MLS that is 5 apartments with a detached "manager's apartment" for $300K. Seller appears to be motivated as it has been on the MLS for well over a year, has made several price reductions, and claims health issues for wanting to be out of it. Property is located near a major military base.

Rents for the area, based on a quick survey of Craigslist, Padmapper, and Zillow, rents for comparable units appear to be $550 for the apartments, and around $800 for the detached apartment. W/S/G paid by landlord is also the norm for this area.

I'd like to know what your next steps would be if you decided to start due diligence on this deal. I am looking at determining the following for now, what am I missing? Any advice for a new investor on how to find some of this?:

Taxes

Vacancy Rates

Water/Gas/Garbage

Insurance

Property Management - 10%

Year Built

Major Renovations?

Accurate Rents - no, I am not just going to trust what I find on Craigslist/Padmapper/Zillow

Thank you for your input, I greatly appreciate the minds here on Bigger Pockets.

[Doug N.]

Hi Alex, 

I would look pretty squinty-eyed at this deal - it seems like it's less than ideal. 

The listing shows a few issues upfront, and zoning appears to be Lakewood MR2, possibly 4plex. Is listed as a 4plex on loopnet, but listing copy claims 5 units.

Serial price reductions in an overheated market, 350 plus days cdom, possible 4vs 5 unit zoning issues, sewer problems, etc. Assessor's value is just slightly less than listing price. 

That's just the beginning, and I would be surprised if that's all there was.

There's a story in there somewhere, and your job is to dig it out! 

Keep us posted.