6 unit building upstate NY - 1st deal

[Moshe H.]

Hi this is my very first deal! I am looking at an REO 6-unit apartment building. It's in a small village but it's becoming kind of a trendy place, within a (long) commuting distance of the city so artistic types seem to be going there to get out of NYC. It's in a prime location in the village, near a few shops and restaurants.

The bank wants $345k but it's in pretty rough shape. Some of the fixtures, cabinets and even appliances are broken and management won't fix them in a timely manner. Even garbage pickup has been suspended for weeks because manager is not on top of anything. The tenants (I met 3 of 5 currently renting, 1 unit vacant) seem to want to stay but they're fed up. I don't think this building is attracting any other investors but me. I see some opportunity because the issues don't seem that hard to fix. I'm willing to get new fridges and cabinets and whatever else the tenants want to be happy. I'd like to freshen up the whole building and make it more attractive so I can raise the rents. It could cost anywhere from $30k-60k because I am just eyeballing it, haven't gotten a contractor bid yet.

Gross rent is claimed to be about $63k when fully rented, $52k right now, but I think I could raise rent if I just give people a decent place to live! Taxes $10k, insurance $2835, owner's portion of electric (common areas) and heating fuel (oil) $8000, sewer & garbage $2000, vacancy 5%. It looks like expenses total $27k plus maintenance costs and I would manage it myself.

I'd like to offer $275k. I have $100k in cash from a refinance and I also need cash to fix up the property. Another big factor in NY is closing costs - think $20k! So I am looking around for creative financing. I made a rough calculation that my zero-cashflow point would be a debt service of $2440/mo. Whatever I pay under that would mean positive cashflow, which is what I'm looking for.

But the building seems like it has so much potential, to raise rents and even eventually add units (it sits on a long narrow parcel about a third of an acre.) I'm really interested. Any thoughts are welcome!!!