8 unit opinions

[Kirk Olson]

I've done a couple deals with out asking for second opinions before and it's bit me, not bad, just didn't make as much as I thought so I'll ask you all once again for validation and opinions on a possible two building 8 unit deal.  They are both 4 units 2 1 bed, 2 2 bed units per building.  Asking price is $280,000 max price for me is $260,000.  The buildings are on separate parcels and lender is willing to do individual 30 year fixed on each one or portfolio loan with 3/1 Arm amoritized over 30 years, both interest rates are just below 4%.  I will manage these buildings, I currently manage another 4 unit building in the same area and know with updates the total rents could increase $3-4$k/yr.

Current Rents:  $3900/mo $46,800/year

Vacancy: 10% $4,680/yr (actual vacancy rate for area is below 5%)

Taxes: $3838/yr

Insurance: $2840/yr for cash value not replacement cost (getting more quotes)

Maintenance: $4500/yr

Utilities: $6,500 (owner currently pays common electric, sewer/trash, and buildings are on well so softener salt and electricity for water pumps.)

Budgeting $5k/yr for capex

Leaves: $19,442 for debt and cash flow

[Logan Hassinger]

@Kirk Olson

What's driving the LTL, is it that units need updating?  If so, then physical vacancy will definitely change. 

The units are all 1b/1b and with all new flooring, tile bathroom, new vanities, new kitchens and appliances. The HVAC, which is your typical condensor outside and furnace inside the closet are about half way through there useful life. Same goes for the water heaters in each unit. I put back enough in CapEx to cover the most expensive items to replace in the first year.

Maybe your CapEx reserve amount is sufficient maybe it isn't, but hey at least we are setting aside an amount we find to be reasonable. You can't foresee the unreasonable.

I also have a separate account to hold reserves.