Should i just go for it?

Question

I have been brainstorming with a client of mine for the last 2 months. I want to partner up with her on an income property or a flip. She has cash to invest and i have time and lots of resources (as a real estate agent). She is extremely motivated to just jump in and get started, while i've been slowly gathering information. Basically i've found a property and i need someone to either say shut up and do it, or keep looking.

List Price $375,000
6 units
Gross income 4,700/month (no vacancies)
taxes $5400/year
needs $25,000 roof

4700sqft living space
6 off street parking spots
bedrooms, 3,3,2,2,2,1
town water and sewer
garage in rough shape - vacant

4 units are rented currently, 2 units have signed leases, 1 unit is section 8, 2 are vacant. Needs new roof and there is a smell of gas in the top unit. The overall condition of the property is a 7/10 imho

The market in my area seems to be flooded with 3 families for sale that barely "cash flow." I ran this property through my investor software and the numbers are far better than any other multi family in the area. Also, if i can't fill the vacancies i'm not going to bleed to death like i would with the 3 family units.

thanks in advance
-Paddy

Charles Weisinger · Answer

I agree its great. Thank you

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you need to test your waters first before you dive in.... this is what i usually do... ask the current owner you want to have the option to buy the house for 6 months.... find renters in there first....(REMEMBER CASH IS KING!!!) if you find no renters...there is no point buying the unit even though its better than other in the community. if you have hard time finding and filling in the unit within 6 months.. don't buy it!!! if you can...congrads and fall through with your option!!! happy buying!!! thanks sunsmicro

Joshua Dorkin · Answer

We've got a great FREE program that will help you analyze income properties: http://www.biggerpockets.com/recritic.html I'm sure it will help you a ton!

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I would say get it under contract with a contingency to leave upon your inspection Look at the guys books, figure out your financing to see what you'd be paying for mortgage, taxes, maintenance, etc. etc.. If everything looks like it would make for a positive cashflow, scoop it up. If not, bail out. By the way, can you really get a positive cashflow with only 4 units rented? With 4k for all 6 rented it seems hard to believe you'd get a positve cashflow with only 2/3 of that coming in with a 375,000 mortgage and $5,400 in taxes per year, not including the other stuff In my area the ratio's between gross income and purchase price are WAY better than that By the way, if you get it under contract to check it out further...make sure u get some1 in there to check that gas leak. Also make sure there aren't other repairs that your overlooking. Spending $300 for a contractor would be a very wise choice in my opinion

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I must be in a good area then because there are TONS of 3 plexes for sale around here from 70-130k which gross about 1200-1500 per month I'm actually going to get a call tomorrow - I found a property that is fully rented right now, grossing $2300 per month selling for 135k...so i'm gonna talk to the realtor tomorrow and hopefully have that as my first property Taxes and insurance are very low around here to. The only thing that "could" go wrong is flooding, but that's only in certain areas near the river. Taxes are only like $2,000-2,500 per year. My problem is going to be finding financing. I have almost no money in the bank lol..but if this deal turns out to be as great as it sounds, or even close...i'll find a way somehow

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thanks btw - it's good to have found this place.

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It's very difficult to find a multis in my area to cash flow well for 20% down. I cannot get a positive CF with 4/6 rented. I'm basically screwed if that happens for a significant amount of time. BUT, the property is walking distance to a hospital so there is a big possibility of getting nurses and maintenence people as tenants if i work hard to get it rented. Yeah i will def have a home inspection and contractor in to take a look before P+S.

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The software is from a guy named Dave Lindahl, a local investor. I'm sure you could google it. It's pretty generic, punch numbers in and it pukes results out. the ARV is a tough one. 425-450,000 actually selling it in this market would be another story... there are 180 multis for sale in the $300-500,000 range in Worcester right now. The market is literally flooded with 3 families. i would def hold for 5-10 years and try to enjoy the CF.

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hi welcome as you are i'm new are to, i'd be interested in the software program you speak of, but what do you plan to pay for the property? there a couple of things here on the board that could help you. what's the value of the building after repairs?