4 plex analysis in Indiana

[Jim Hartmann]

Hello all.  I wanted to get feedback from those more experienced about a 4 plex that I visited on Friday here in central Indiana (about 40 miles south of Indy).  The house is listed with a realtor and is being sold by another landlord who is getting older and seems to be selling due to just wearing down after years in the business.  I currently have a mix of 13 different units in 5 different houses in the local area.  I bought the majority of them on contract right before the 2008 crash, so I paid too much for them, but it has worked out over time and I have come out fairly even on profit vs expenses.  I am increasing rents on those and so I am starting to see things turn to the better.  Hoping to run the info I have by everyone and hopefully start to get back into analyzing properties for purchase.  With the forums, I have noticed so much knowledge here that I want to make sure to get feedback before making a decision as I jump back in again to the market.

House has four 1BR/1Ba units in them.  It is on a crawl space and was built in 1920, so it does have some age to the house even though the outside of the house looks good with fairly new vinyl siding and some of the roof has been replaced with the other portion of the roof still in acceptable condition.  House just dropped in price from $99,900 to $94,500.  House has been on the market for almost 120 days.  The owner vacated all the units in order to make it easier for the realtor to show the property (not having to schedule showings with tenants).  

The house is already separately metered for gas and electric, but the owner currently pays for water/sewage/trash as it is not separately metered.  I did notice that it has old electrical panels with round glass fuses rather than the breakers used now days.  Also during my walk through I noticed what looked like knob and tube wiring in the attic, so I am assuming this same wiring runs through the rest of the house as well, but have not checked into this.  I did not get into the crawl space to check it out as of yet, but would do this myself and have an inspector check it over before buying also.

The current owner states that he was getting on average $450/month per unit which is quite low for the area.  I have another 6 unit house around the corner from this one and I am getting $520/month for just a sleeping room (shared bath).  I am expecting that for a larger 1 BR, I should be able to get $600-$650/month from each unit.  

Running the numbers using the BP rental calculator, I am using some conservative numbers. Income: $2500/mo ($625/unit). Expenses: Water/Sewer: $80/mo.; Insurance: $175/mo.; Taxes: $180.25 (based upon current annual taxes); 10% vacancy: $255/mo; 3% Repairs/maintenance: $76.50; 5% CapEx: $127.50; 10% mgmt fees: $255 (would likely self manage as on other properties).

With running these numbers, it shows the following summary:  Income: $2500/mo;  Expenses: $1673/mo;  CashFlow/mo: $826.  

From my point of view the numbers look good.  The apartments were clean and were very functional.  It does not have a lot of new flooring, but what was there was all clean and not damaged.  Each unit has a separate gas furnace in each apartment.  

Wanted to get the opinions of others on the forums here to see what I am missing.  I like the house and the neighborhood.  I already have another house in the area, I am familiar with the type of tenants I would be getting.  Also it is two blocks from a major factory in town (which is where I work during the day.  I am sorry for the long post, but welcome your thoughts on whether this would be a good deal if all checks out during the inspections.  

Thanks in advance for your feedback.