8 unit analysis

[Account Closed]

FSBO - Two 4 unit buildings on same property 8 units total. Seller financing - will hold back a second. All units rented with long term tenants - all units in good shape. Gross Income $4675/mo. - property is in Belfast, Maine - property taxes estimated at $5K annual, one house has all utilities paid by tenants, second house has an efficient oil burner - owner has been paying heat. Asking $274K - has to sell and move due to business owned on West Coast.

What do you think. This is a little more than 2 hours from my home.

:roll:

[Jon Holdman]

I'd agree with the others that owner paid heat is a bad idea. Before you consider this property, get several years worth of actual heating bills.

Hot water heat is pretty amenable to bill back systems, since you can just monitor when they have their valve open and charge them a fraction based on that time. There are systems that do this RUBBS or similar acronyms.

I would apply the 50% rule, then tack on some extra for the owner paid utilities. Just based on the 50% rule, I see it like this:

Rent $4675
Expenses: $2337
NOI: $2337
Payment: $1823
Cash flow: $515
Cash flow per unit: $64

That's a bit low, and I think the owner paid heat will drive your expenses higher. If you paid $230K you'd be right at $100/unit/month, not counting the extra expense for heat.

A seller second doesn't translate into 100% financing. For my payments, I assumed 7% for 30 years. That would be pretty good for a commercial loan. If the two quads are separately deeded (doesn't sound like it), you might get conventional financing for each.

I'd like it better at $230K and tenant paid heat.