4-plex in Richmond, VA

[Randy Frederick]

Hello BPers!

Need some help analyzing my first potential deal:

It's a 4-plex in a burgeoning neighborhood in downtown Richmond, VA. Lots of development going on with associated gentrification. It is a newly constructed building, only two years old.

It has 4 one-bedrooms, each about 700sq ft.

Currently three are rented for $850, one for $900, for a total monthly income of $3450. One of the tenants is moving out at the end of this month. Possibly can increase rent to $900?

Landlord pays about $200 a month for water, other utilities paid by tenants.

Asking price is $499,000 which is completely out of reach.

Crunching the numbers, I think $350,000 would be reasonable. That would give me roughly $450 of monthly cash flow (about $100 per door), with cash on cash ROI of 7% assuming 20% down payment and minimal repairs. Further assumptions are 5% vacancy, 5% repairs/maintenance, 10% cap ex, and 10% management fees. Total monthly expenses hovering close to $3,000.

The owner has moved out of town, and according to his realtor is looking to unload the place. I don't know if he will even go for this, but it never hurts to ask!

One more question for the veterans, how would you work possible seller financing into the deal? Would you try to get 20% seller financing, 80% traditional, to minimize upfront cost? 100% seller financing? If so, would you be willing to accept a higher sales price to keep more liquid cash on hand?

Thanks for your help!  

Randy