6 Unit Apartment Building, Is it a good deal?
Hello BP,
I am interested in buying this 6 unit apartment building.
6 Unit Building, Each unit is 2 bedroom 1 bath, 725 sqft
Total rent $3400 per month
Taxes $459
Insurance $250
Repair & Maintenance $300
Cap Ex $150
Vacancy & Uncollected Funds $340
Trash $60
Lawn Care / Snow Removal $125
Electric, gas, water and sewer are paid by the tenants.
Purchase price $165,000 (seller will be paying my closing cost)
Click the link below:
https://www.biggerpockets.com/calculators/shared/1...
Would like to get your thoughts.
Thank you.
Most Popular Reply
I agree that you cannot always raise rents year to year to move steadily with inflation. Inflation is an average and our economy has unpredictable good years and bad years that can be amplified by local economic trends. Raising rents can be tricky because if you go too far, you have vacancies that cost time and money. Trying to squeeze an extra $25 here and $50 there in this particular price point can drive away good tenants and cost a month of rent that negates the benefit of the increase for many months. In my opinion, it makes sense to keep rents in line with your competition and even undercut slightly to keep the good ones. I try to only raise rents through attrition and/or to keep pace with an increase in taxes or insurance. The beauty of raising the rents when a tenant moves out is that if you are given the proper 30 day notice, you can raise the rent to test the market reaction for a couple of weeks where you are not vacant. If you are dead in the water price wise, then you have the opportunity to drop the price to a level that the market will bear before you have a vacancy. To me, it seems that the ROI for this is strong enough where you do not need to start raising immediately, unless you are well under market with rents, which it sounds like you are not. When someone gives you notice, raise the rent in your ad to see what kind of activity you get. Now, if you start seeing similar competing units renting for $750 and $800 and so on, then it's value add time.