Multi-family in Norwich, CT. Is this a good deal?

[Robert Lindsley]

Hi there,

I'm getting ready to make an offer on a 7-unit building in Norwich, CT.  Before I made the offer I wanted to reach out and ask for thoughts from the community.  Is this a good deal?

The building is mixed-use; 7 units are apartments and there's one additional space (garage) zoned commercial.  The building is being purchased through seller financing and the owner has given me two financing scenarios (outlined below). 

Here are the fixed costs:

7 units and 1 commercial space - total rent $6225/mth

Taxes: 277/mth

Ins: 365/mth

Utilities: 1050/mth

Vacancy: Building is full, but assume $311.25/mth

CapEx: The roof has been replaced in the past year, along with new heating system and water heaters. This building has been taken care of, but I'm still assuming $311.25/mth

Repairs: Again, the building is in great condition, but assuming $311.25/mth

And here are the variables based on my down payment.  The seller has given me two options:

- If I put down $48k, the purchase price is $485k with 8% seller financing for 5 years

- If I put down $85k, the purchase price is $400k with 6% seller financing for 5 years

- The seller claims (and we'll see when it's appraised) the building is worth $550k

Based on the amount down, here are the scenarios I determined:

Worst case scenario: $48.5 down @ 8% would net $689.25/mth

Best case scenario: $85k down @ 6% would net $2024.25/mth

I can comfortably put $48k down but $85k is much harder. So I'm figuring out how to get the additional funds.

I can't wait to hear your thoughts on this!  Is the worst-case scenario good enough for a few years until I can refinance and get a better rate using the built-in equity on the house.  Or should I beg, borrow and steal to get the additional funding?

Thanks!
Robert.