Fourplex opportunity

[Bala P.]

Hello all,

Had been away for a while due to other commitments.

Anyway today this property was brought to my attention through an acquaintance. Here are the details and would like your opinion on this.

- Quadplex in Richardson, Texas
- Gross Income : $27,600
- Expenses : $11,405 (Utilities paid by the owner, insurance and property tax
$4200, I think is little too much, almost two months of
rent, but this is Texas remember)
- Asking price $165,000
- Built in the 1960s

Using the 50% rule, expenses would be almost $14,000

So per unit calculation would be

Rent : $575
Expenses : $288
NOI : $287
Debt Service : $185.49 (Based on 25% down, 6%, 30 years asking price)
Cash Flow : $101.50

Calculated Cap Rate 8.8%

The property is 100% occupied, and owned by an elderly couple with several other units. Considering the age of the property I am little skeptical how much deferred maintenance it holds. I have not viewed or started any conversation with the owner yet. The property is in a blue collar neighborhood.

To achieve a cap rate of 10% or above the price has to be $137,760 or lower.

What do you all think and how much should I consider without too much or a too low ball of an offer?

Thanks

[Jon Klaus]

Bala, I think the real expenses will exceed 50% on this one, mainly because the utilities are owner paid. This can be a black hole. $41k a door isn't bad in Richardson, but only with only $575 rent per, and you paying "all bills," I think I'd pass.