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Updated about 14 years ago,
How much would you pay (Would you want this deal)??
I have an interesting investment opportunity, very interested in some expert opinions:
The good -
5k sq foot total, 4 plex with 3 3bd/2bath units and one 2bd. Suburb of PHX but good area, right off the freeway next to $150k plus homes. Built in late 70s. Base of a mountain with nice views. All units have a one car garage, concrete block foundation, nice landscaping and curb appeal. All four units subdivided to separate parcels but they are all attached (slightly higher tax bill but opportunity to sell by the parcel). There are a total of 3 of these buildings and I already own one (building 2) and in the process of rehabbing. I paid $29k on that building. The other two are foreclosure sales and available.
The bad - Building one - roof is destroyed, signs of leaking everywhere. Roof will need to be replaced. Old but functioning AC units Signs of termite tunnels from the drywall ceiling in some areas. Most of the ceiling drywall will need to be replaced. Garage doors, flooring, paint, appliances all will need to be rehabbed. Finally the worst part - all three buildings are on separate septic systems. Septics are original and too small by original design and most likely permitted to begin with. I have had spetic inspection reports and bids for new units. Building 1 has signs of complete septic failure, building 2 which I own has a salvageable septic that will need frequent pumping, building 3 same as 2. Finally, all septics are behind the backyard and on someone else's property. There is no easement. I can probably get away with using the system until failure on the building I own but all three will need to be replaced and dug onto the land parcel on the building.
The deal - I purchased building 2 for $29k. I replaced the roof for $12k and will be able to rehab all four units for $8-10k. All in for $50-$55k with a septic that will need eventual replacement. Had two quotes for an entire new septic system at $10k with warranty. City sewer is far and not an option.
Building 1 is offered at $45k, needs roof, entire rehab and definitely septic. I've offered $20k and can probably get it for $25k-$30k.
Building 3 is offered at 75k down from $90k. It is fully remodeled on the inside (near turnkey, just needs a few windows) and has a decent roof. I'm in contract at $60k. This will also eventually need a new septic. I'm very hesitant to double up my exposure.
The goal was to own all 3 and have all headaches in one place.
Finally - the economics:
3bd will rent for $625, 2bd for $475 for a total of $2,350 in rent. It is a good location with ok tenants, definitely not a war zone. Fits the 2% rule all day and is one of the better comparative deals out there in my area IF all goes according to plan.
Questions:
1. Is it foolish to double/triple down in one area like that thus increasing risk/reward.
2. Is the septic issue just too much of a possible future headache? The septics will eventually be new and I have the cash and reserves to do the project right. I'd love to hear real world experiences dealing with septic systems.
3. Is this something you guys would be considering??
Sorry for all the detail, thought I'd get it all out there. Very interested to hear your thoughts.