My first investment property deal (property 1701)

[John Cassel]

Over the last year I have been learning everything I can about investing in Real Estate.  I have read numerous books, listened to 100s of podcasts, watched youtube videos and have been reading everything on Bigger Pockets.  Through a connection at work I have stumbled upon an investment property that I want to purchase but since it is my first deal I want to make sure I am not missing something important.

I developed a friendship with a colleague at work and he was gracious enough to take me around to see his rental properties.  He is older, makes a high salary and all of his rental properties are fully paid off.  He says he doesn't really need the money and would like to start selling some of his properties for less hassle.  He is not actively selling any of his deals but he told me if I was interested to let him know and he would be willing to sell for a fair price.

The property I am interested in is an old funeral home that was converted to a 7 unit investment property (4 small businesses & 3 one bed room apartments).  He has not raised the rents for any of the apartments in years and all of the businesses have been there for years and are taken care of by a commercial management company. There are also 17 parking spaces and a two car heated garage.  5 of the parking spaces are rented to a business right across the street.  There are two AC Units in the building, one for first and one for second floor, that are only 1-2 years old.  Boiler is original.  Here is the financials for the last 12 months of the property

Income (yearly)

Business 1 - $5580 (after mgmt. fee)

Business 2 - $5580 (after mgmt. fee)

Business 3 - $9820 (after mgmt. fee)

Business 4 - $8091 (after mgmt. fee)

Apt 1 - $5220

Apt 2 - $5700

Apt 3 - $6300

Basement  - $1920 (rented out twice a month for VFW meeting)

Parking - $1500

Total - $49711

Expenses

HOI - $1539

Elec - $2274

Gas - $3781

Taxes  - $9067

Sewer - $1778

Lawn  - $1650 (lawn, flowers, snow)

Reno  - $511 (locks, paint, drywall, caulk)

Maint - $800

BoilerIns - $62

Vacancy -  $4971 (10% added by me)

CapEX (8%) - $3977 (added by me)

Bath Sup - $320

Total   - $30730

NOI - $18981

Debt - $12420 (assuming 75%LTV and $250,000 purchase price)

CF     - $6561

COC - $(6561/62,500) = 10.5 %

Currently the average 1 bed room rent for the area is $585 which is well above the current rents.  Each unit also has a brand new washer/dryer and the tenants do not pay any of the utilities so there is a serious value add opportunity.  I believe I could also take down the lawn/snow cost because I would be doing it all myself.  I would aim to get the price at $225-230k as the assessment office current appraisal is 200k even though that is not a good value for multi family.  The place is very well taken care of since it was an old funeral home. The roof is still in good shape which might mean my cap ex is a little high but id rather be conservative on my numbers.

Any comments, things I missed, any errors or just any help in general would be greatly appreciated. I preferably want to go for properties closer to the 15% COC return mark but I think that is easily attainable with some slight rent increases closer to market.

Thank you!

John