Analyzing first deal

[Ryan Proffit]

Hello guys, I am working on making my first deal.  I am working with a partner who has about 10 years of experience.  We are looking at two 4-plexes on same lot.  The lot is also big enough to build another 4-plex as well.  The seller is asking $390,000.  The current rents are $3995 when fully rented which are extremely low.  There is currently one vacant unit.  This is a very nice property in a very sought after area.  It is currently off market and unadvertised.  After we buy it, we plan to paint and carpet the vacant unit, and raise rent on all other units to market value.  That would bring rents to around $5250.  We are also hoping to get the owner to finance it.  I am currently checking on taxes, other than that am I missing anything?  Feel free to correct me on any of this.  I also plan to try and get a price reduction if we have to source financing through a bank.  Thanks for your time.

Ryan.

[Ryan Proffit]

Originally posted by @Joe Sadusky:

@Ryan Proffit definitely sounds like a cool property, congrats!

If you're banking on building that additional 4-plex on the lot, I suggest checking with local zoning prior to closing the deal.  Why are the current rents so much lower then your anticipated rental income?  I would also make sure that you are looking at the most recent rental comps and also make sure they is a healthy rental market in your area.   Do you plan on getting all new tenants? 

When we run the numbers for rental income, we usually assume around 10% less then what we believe we can actually get.  This way, there is room to accept less rent and not drastically hit our bottom line. 

Best of Luck! 

I personally know the owner, and my dad lives in one of the units.  Basically, the owner is a homebuilder, as well as has about 130 units.  I think he basically does not have enough time to be an effective landlord.  He built these units, and has owned them for 20 years, and I think he does not like the hassle of being a landlord.  The updated rental price i provided is still lower than market by a little bit.  I know probably half of the tenants would stay even with a rent increase.  I am currently trying to get clarity on how many of them actually have a lease.  It has been a very hands off situation at this property.