Could use some help analyzing 5 unit multifamily deal.

[Tony Pinckard]

Hi guys, would love some thoughts and advice on a deal I am looking at.  I currently own 2 rental properties as well as my primary residence.  The two rental properties are both single family houses.

The deal in question is a 5 unit multifamily located in central Arkansas.   Much different than what I have dealt with thus far and frankly pretty intimidating to me personally.

Anyways the asking price is $270,000.  All units are 2 bedroom, 1 bath.  4760 square feet all told.  From the listing it seems three of the units are rented out at $600 each with the other two units vacant and under a remodel.  The listing says remodel material conveys with purchase.  The proberty has been listed for over 6 months.  I would be using my current property manager at 10% of total rent.

I would really appreciate any advice on what would be a good price point to make this a successful deal.  Thank you!

[Anthony Dooley]

Calculate your offer based on the current rents. Don't include the two unlivable units, because they produce zero income. If it makes it easier to calculate, look at it as 5 properties and they are asking $54,000 each for them. Is that a good deal? I don't know, but you should.

Once you buy the property, renegotiate a lower rate with your property manager. Otherwise, you should shop around or manage yourself.

You also need to get estimates on finishing the rehab. Is $600 market rent or is that low for the area?

There is obviously room for adding value to this property, but only pay for what you are getting. This will be hard work, but once you get everything renovated and producing higher rent, refinance and buy another deal with the equity.