7 Units of Single Family Homes in Mobile, AL

[Bryson Cox]

Hey guys! 

I'm fairly new to BiggerPockets but wanted some advice on a deal I'm looking into right now. The purchase includes 7 separate, single family homes on 4.2 acres of land: (1) 3 bedroom unit collecting $800/mo, (2) 2 bedroom units collecting $600/mo, and (5) 1 bedroom units collecting $450/mo. There is the potential to build out on 2 of the acres, which are mostly forest, that could add another 6-8 units in the future. The property is located 7 minutes from a university so we are hopping to be able to create more units in this desirable area. Straight up as is what do you think of the deal? If the numbers aren't as desirable, at what point would it work? 

At a lower purchase price of $325,000, the net monthly incomes goes up to about $700/mo and the cash on cash ROI goes up to about 12% which are my ideal markers. But the sellers have already accepted my non binding initial offer of $350k and I'm wondering if I should risk lowering my offer? I feel like the obvious answer is to.....only agree to a purchase price with numbers that meet all of my requirements. But how do I factor in the potential of adding units? And this is one of only a few properties for sale in my current niche and market so do I just jump on it while it's still available?? Also, let me know what you think about my estimations in expenses, im curious if they are accurate.

Thanks for any feedback and advice!

Income:

$3,800 Gross Monthly Rent Collected

Expenses:

Management $380 (10%)

CapEx $228 (6%)

Repairs $150 (4%)

Vacancy $304 (8%)

Wind/Hail $200 (5%)

Property Taxes $200 (5%)

P&I: $1,900 (50%)

NET PROFIT = $450-500/Month

Cash on Cash ROI: 8%

LOAN DETAILS:

Purchase Price: $350,000

Downpayment: $70,000 (20%)

Amortized Over: 20 Years

Loan Interest Rate: 5%

Income-Expense Ratio: 1.08%

Gross Rent Multiplier: 7.68

[Bryson Cox]

Hey @Josh Stack,

Thanks for the reply! I've been learning as much as I can the past few months on Bigger Pockets so your response was helpful. I definitely did not want to backtrack on my offer and lower less but after physically inspecting the property and the neighborhood it was located in, I realized that it wasn't ideal for my investment goals. There is huge potential in clearing out the extra land that is currently forest and adding multiple apartment complexes but that isn't a project I feel like I am not ready for. My initial goal is to build cash flow with Du/Tri/Quad plexes and add small apartment complexes to our portfolio that can be profitable. My mistake was sending them a LOI too soon through an online site without first getting on the ground and inspecting the property. I'll continue to learn from my mistakes and keep pushing forward! Thanks!