Monster in Maine - 4 Unit Deal Analysis - looking for feedback

[Tammy Richards]

I've had a lot of fun analyzing properties for months now.   I think I found one to buy, and would like some feedback from the many of you who are way more experienced than I.  My goal:cash flow, pay down the building to build equity to either purchase additional properties.Plan on holding for 15-20 years.

4 unit building, a large triple decker with addition. in small, working class city in Maine. Ugly asbestos siding, with a nice side yard and river views from a couple of rooms.  Class C neighborhood, quiet but walkable to downtown, possible appreciation if this small city gains favor through people not being able to afford the bigger city up the coast – but not counting on it. Renters are low income, Section 8 in the smaller 2 BR units, large and/or extended family living together in the very large (4-5 BR) units

Purchase price 265K

Loan 265K, seller pays5K closing, 4.67% interest rate for 30 years, $

Taxes $4251

Total rental income $4665 month (1 5BR unit, 1 4BR unit, 2 2BR units) – rents are maxed for this area, they are high because of the size of the units, they all have washer/dryers, and small dogs/cats are allowed.

Area average vacancy rate 14%

Property management 10% of rent

Property insurance $1800/month

Maintenance $5300/month (I budgeted high, deferred maintenance on this one, will take a while to catch up)

$281 annual electric for common areas

$1388 water/sewer

$2400 annual Cap Exp (estimated roof life as of now – 20-25 years, heating system – 15-20 years

$6100 heating bill (oil) last year

20 K is needed to repair foundation issues and one bathroom in need of repairs (I'll pay out of pocket next spring).

Your thoughts?  

[Tom S.]

@Tammy Richards

Smart that you over-budgeted for oil.  Yes, same here, most multi unit buildings have one boiler system.  I have a 5 unit at 4500 SF, and just insulated it well and also I get recommendations from the heating company on tuning the boiler for maximum efficiency.  My oil bill came in at $3900 last winter.

Personally I've had better success buying duplexes after this big one; most are metered separately and the numbers work better.

Good luck!