10 Unit Low income Property..Input

[Sam H.]

I have been looking at a very low priced 10 unit brick building in IN. THe price and numbers turn out to seem as if it would be an excellent cash flow situation.

The Purchase price is $165,000 , Expenses including Mortgage payment are $25,000 annually , and income at 15 % vacancy is 48,540 ( being conservative due to risky nature of low income tenants) Net cash flow annually would be about $20,040

i have verified all 10 units are occupied and the building is obviously rentable currently. As tenants move out I intend to rehab the property unit by unit. With the asking price and the ability to rehab. and bring rents closer to market rents it seems to me that this property is a good deal.

First off am i missing something here that should deter me from this deal?

I have walked the property is it normal to be taken back by the living conditions in a lower income rental building? The tenants seemed content.

The property is no diamond aesthetically but it produces money thats what is important? I am just starting out and the price is attainable for me and I have the energy to maintain the place so I just would like some insight from the successful folks on here? Thanks for your input and time!!

[Al Williamson]

Ok, would this be your first rental? Starting out the gate with 10 units is quite a handful. Hopefully your lender won't object.

Depending on your personality, the management piece will be the most taxing (and sounds like you already know this). There are numerous management styles for low income properties. Kenneth LaVoie sounds like he may have a much different style than mine, but his approach may be effective for him.

My approach is to crime-proof the building, network with neighboring landlords to make the block orderly, and stay on top of small things that lead to large problems (that's a long discussion). You will eventually repel the “bad” and attract the “good” within the same income bracket. Best to you.