Buying: how to approach 130k+ in deferred maintenance

[Ari Archer]

Hi–

I'm looking at buying a 4plex in Solano County (outer Bay Area, CA) for ~$350k. The price has dropped once already primarily due to some pretty substantial deferred maintenance that the seller doesn't want to deal with (new roof, retaining wall, some dry rot).

Looking at COCROI/Cap Rate and other numbers, the place looks to cash flow handsomely already – around 1k/mo with existing tenants at existing rates. My question is about how to approach the deferred maintenance. Should I do as much of it as I can a.s.a.p., or should I patiently use income to pay for repairs? There are minimal health & safety concerns at this point (which I can deal with quickly) but I'm trying to strategize the best approach to rehabbing this property.

Thanks!

[Ryan Hopkins]

I think this really depends on a number of variables, but your first concern is always to maintain the health standards for your tenants.  Get those updated undoubtedly.  If your finances see fit, I would go through unit by unit to update and take care of the deferred maintenance.  Once complete you will be presented the opportunity to increase rent, move on from the tenant or a combination of both.  Monetize the cost-benefit, outside of the health standards of course, and put that into your cash flow analysis.

Keep us updated on you approach.