4Plex Analysis - Need Opinions!

[Jared Sanderson]

Evenin' BP! Looking to purchase my first rental and found a 4plex I'm interested in. Rents are $800/unit...probably fetch a bit more with updated units but using $800 for my analysis. C- neighborhood, only looking at it to cash flow. Price is $63k, will need good amount of rehab. First glance estimating $40k but going to walk thru with contractor to know with more certainty. Assuming that rehab budget...are my other numbers reasonable? Since units will be rehabbed, I feel I'm assuming too much in repairs and CapEx. I've got a management number, may do it myself but have it in there. What else am I missing?

Appreciative to all opinions, constructive and otherwise.  Am I bat**** crazy on this one?

[James Wilcox]

@Jared Sanderson obviously it is hard to make a good analysis based on the information given just because I personally do not know your market/area. I am also assuming this property is not currently under contract and is 100% leased up.

I do see some expense for utility usage that you would be paying. Is this for common area utilities or are you paying for your tenant's utilities? If the owner covers utilities for all 4 units, I would put that amount much higher. If there is common area yard maintenance needed I would factor that in as well (maybe in your Misc).

Also, with it being stated as a "Class C" MFH that needs some work, I would maybe factor in a tad more on the vacancy at first or be prepared for higher vacancies at the start. In these types of properties when there is a new owner, there may be a repositioning period to get the property more stable. You may have to evict current tenants, have tenants leave without notice, attend to more deferred maintenance issues, ect... Although all of those items may seem daunting, that maybe one reason that you have the opportunity to buy the property at a lower price and there is a value add opportunity. I would be prepared to have access to funds for repairs and proper maintenance on this property.

Here are some items I would look into and see if they are a good fit for you:

• Write your offer with an inspection clause and study the report of the property to see if there are any more defects that you have not noticed and that maybe deal breakers.
• Get a copy of the current leases
• Get some sort of income verification of these rents. Estoppel certificate, bank statements, rent payment schedules, ect... Just verify that tenants are paying on time and in full. This will help you see if there are any problem tenants currently.
• Know your ARV and have an exit strategy.

Hope that gives you some tips and good luck in all your future REI ventures!