8 unit building

[Scott Bastarache]

I have an opportunity to obtain an 8 unit building where the owner is willing to finance. The building is currently 100% occupied. Here are the numbers:

Purchase Price: 249,900 financed @7% I/O for 30yr term
Gross Income: 61,596
*Expenses: 34,300
NOI: 23,036
Annual Debt Serv. 17493.

The expenses portion is where we are concerned. This number includes heat / hot water for all units. It also includes things such as advertising, taxes, insurace, property management, water/sewer, electricity, rubbish and snow.

We are also looking to serve as our own property managers for this building but are unsure of what sort of time that would entail. My feeling is that I am willing to take a little less on the per door profit to be able to get into my first multi-unit building with very little out of pocket expenses. I am not sure if the per door of $57 plus the additional $5,000/yr for prop man. is too little to make the deal worth it.

I'll end this with two questions.

1) How do the numbers look?
2) How much time needs to be allocated to effectively manage a property of this size?

Thanks,
Scott

[Michael Rossi]

Chris,

The problem with owner paid utilities is that the tenants will use multiples of what they would use if they paid their own utilities. I SEE THIS EVERY DAY IN MY BUSINESS.

Drive around during the winter and look at windows. You'll be SHOCKED at the number of windows you'll see open when the temperature outside is in the single digits! Why, these deadbeats aren't paying their heating bill. Either the taxpayer is paying for it or some ignornant landlord is losing their butt.

Now, consider what happens when the tenant gets mad at you for ANYTHING. They'll turn the heat or air conditioning all the way up and open all the windows.

JUST SAY NO TO OWNER PAID UTILITIES!