REO 6plex

[Mariah Jeffery]

I will be putting a bid on an REO 6 plex in about a week, and I'm trying to figure out how much to offer with a lot of missing info.

Rehab
The units appear to be in excellent condition for an REO. One unit needs all new flooring. 4 need new refrigerators. The roof and siding are only a few years old. The biggest issue is the utilities; there are only 3 electric meters and 2 gas meters, so I'd be stuck paying all utilities. I'd want to put in tankless water heaters. I'm estimating about $5K is what it would take in total.

Rents
There is one 2 bedroom/1 bath unit, four 1/1's, and one efficiency. However, they are enormous for the number of bedrooms; the efficiency is 700 sq. ft and the other units are around 1,100 sq. ft. My other one bedroom units are about 500 sq. ft. and rent for $425 without any utilities included, so I'd guess these would be at least $600 for the one bedroom, $500 for the efficiency and $700 for the 2 bedrooms since all utilities are included. Rents estimated at $3,600, but I could be off. 2 units have W/D hookups, so for the other 4 units I'm estimating $100/month in laundry income, for a total of $3,700/month.

Expenses
Average cost for utilities is currently about $800/month for w/s/g, gas & electric for 6 units but I think I could reduce those with the tankless water heaters. Taxes are $3,600/yr and insurance is $1,500/yr. Property management would be 8.5%.
Total monthly expenses: $700 (estimated utilities after tankless heaters) + $425 T/I + $284 PM + $600 maintenance & misc. =~ $2K/month

Financing
5.5% fixed for 5 years, 30% down, 20 year am., rate increase capped at 2% every 5 years.

I don't have anything commercial yet so I'm not sure how to factor in the variable interest rate.

How much should I offer for this one?