First Deal -- 5 Unit in small college town
Hi BP,
First post! I'm hoping you guys can help a newbie out. I'm looking for my first rental investment and stumbled across this one in my small Midwestern hometown. It seems like an amazing deal -- so I want to run it by you all in case I'm missing something.
Property Details
Listed on MLS for $185k; on market for 249 days
5-units: 1 efficiency, 3 1-bedrooms, 1 2-bedroom
All units currently leased to students through Aug. 2017
3 blocks from local 4-year university that ranks top 15 in the state
Roof <2 years old; all furnaces <10 years old
Annualized Net Operating Income
Rent: $32k
Vacancy: 3% or $1k
Property mgmt: 10% or $3.2k
Taxes: $6.4k
Water + other utilities: $2.3k
Insurance: $1.2k
Maintenance: $1.5k
NOI: $16.4k
Financing
I'm hoping I can negotiate the price down to $160k and put down 25% $40k
Cash on cash return: 40.24%
Apparently the roadblock for this property has been financing since it's a 5-unit and would require a commercial loan. I'm calling up local banks tomorrow AM. If I can't find one willing to lend to me, between my savings and a few other folks who might be interested in the deal, I could offer cash.
Questions
- What other factors should I take into consideration?
- If I do purchase in cash, what's a reasonable discount? $5k - $10k?
- If I do purchase in cash, should my goal be to refinance it to free up my capital?
Thanks for everyone's help and patience ahead of time.