8 duplexes in northwest Georgia

[Aaron Stanford]

About to close on a commercial multifamily deal in Calhoun, GA, and would love any insight or suggestions the Biggerpockets community has to offer.

Goal:

Begin process of developing sufficient cash flow to replace full time income.  Provide safe, clean, and desirable living space for tenants.

Specifically, I'd like to own units that don't have significant deferred maintenance and generate monthly cashflow of $3,000.

Property:

The subject property is 16 units located on the outskirts of Calhoun, GA.  Property class is currently C, but can be raised to C+ by addressing deferred maintenance and leveraging low cost design and efficiency improvements gleaned from our rehab business.  Each unit is ~950sqft, with 8 units being 2bd / 2ba and 8 being 2bd / 1.5ba.

Purchase price is $538,000.  Down payment is $81,000.  Closing costs covered by seller.

NOI:

NOI is projected at $61,500 / yr or $5,150 / mo

Current gross rental income at 100% occupancy is $8,600 / mo.

Projected expenses, at $3,450, include vacancy, taxes, insurance, management fees, repairs, garbage collection, and lawn care.

Additional information:

Debt service is $3,000 / mo. CapEx, after an initial investment to remediate deferred maintenance, is estimated to be $200 / mo. Deferred maintenance includes 8 of the HVAC units (early 2000's) and 2 of the roofs. Several units have had long term tenants, and the property was self managed for the last several years, so repairs were completed by one the partners.

Current estimated monthly cashflow should come in around $2,200 / mo.  Five of the 16 units are currently renting at $450 / mo to long term tenants.  Based upon our above goal, we feel that $650 is a reasonable target rental rate for the neighborhood and surrounding area, and that we can get 14 of the 16 units up to that in the next 12-18 months, thereby bringing gross rental income to ~$10,000.

Again, any thoughts, concerns, or questions would be welcome!