How much to pay for 4-unit REO

[Mariah Jeffery]

I just viewed a 4-unit REO property that will come on the market tomorrow. It's in good shape structurally except for frozen pipes, which is a pretty big deal. Cosmetically, it needs a lot of work. I estimated $22K worth of work, so I'm factoring in $35K to be safe. It last rented for $600/unit including gas and water. This was over 1.5 years ago before the foreclosure. I was planning to put in electric water heaters or possibly even get it metered separately. Since it's been vacant for so long, I can't get an accurate rent or utility bill number, but I think the $600 with gas could be raised to $625, since this is a strong rental market. I think they could bring $550-$575 w/ no utilities included. The agent expects a list price of between $60K-$80K.

[Will Barnard]

Peter adds great advice. In fact, one of the biggest reasons an investor fails is that they underestimate repair costs and thus, overpay for the property.

Re-piping 4 units will not be cheap and you have to factor in that you will need drywall replacement and then painting. All in all, this could easily hit you with the $22k on its own.
It is dangerous waters buying utilities paid by landlord as tenants can run up your bills with little recourse for you. Seperate meters is the way to go, but doing so will cost you.
Unless you steal this one from the bank, you may need to move on. You should be an experienced rehabber to take on such a project in my opinion.