Old House Converted to Five-plex

[Jeff Taylor]

I'm looking at an old home in a low-rent part of town. It's been converted to a 5 unit. 

Total rents = $2250/mo. 

They are asking $70,000. 

That seems great until I tell you that the landlord pays water, electricity, and gas. 

As I enter numbers in my spreadsheet, I find that everything depends on the monthly utility costs.

If utilities are $500 a month, the monthly cash flow is $494 with 27% ROI.

If utilities are $750 a month, the monthly cash flow is $245 with 14% ROI.

If utilities are $1000 a month, the monthly cash flow is -$5 with -0.3% ROI.

I have a call out to the current owner/listing agent about utility costs. I am starting to wonder if the owner wants to unload the property before summer hits and his tenants crank on their window A/C units.

Feedback is appreciated. Thank you.

[Gino Barbaro]

@Jeff Taylor

Hi Jeff

Is there any way you can have the tenants be partially responsible for the utilities by implementing RUBS. (ratio utility billing).  Check to see if other landlords are doing this.  If you can, then you may have a deal.

Visit www.nwp.com for more info

Gino