4 Plex Due Diligence

[Hal Cranmer]

Hi,

I am interested in a 4-plex that is right across the street from one of my other rentals and in a very good rental area. Here are the numbers:

Purchase price: $340K
Downpayment: 20% (68K)
Monthly mortgage payments (4.375% mortgage): $1358
Taxes: $6,552 (yeah, life in the big city): $546/month
Insurance: $300/month
Water, trash and sewer: $300/month (can't be separated)
Heat: $200/month (city gives you a smoothing plan to pay the same all year long)
Rents: $4500/month (it is fully rented)

It could keep going as is, but I think with a little rehab $15-$20K, I could get at least $5,000/month. I have 4 multifamily units in the area and know the rents well. Here are some questions I have (other than do you think it sounds like a decent deal):

- There is one gas boiler feeding all the units. But there are separate water heaters for each unit, which the tenant pays. How difficult would it be to separate the boiler into different zones so the tenants pay the heat? Any idea of cost ranges? I'm not sure if the boiler room is big enough for 4 separate boilers.

- Part of the $4500 rent the current owner is charging includes two big rooms in the basement that he rents out for Karaoke (?!) and card playing parties to some of the current tenants. I think I could get that $5K in rent WITHOUT the basement rent, but I was wondering if anyone has any creative options for these rooms that I could collect more rent from them? I didn't see a bathroom down there so I'm guessing it would be hard to rent them out to anyone but the current tenants, or maybe it would be worth looking into adding a bathroom? Any other ideas? I am guessing you have to have the place rezoned if I rented it out to anyone who might want to have a business down there?

Any other thoughts on this would be much appreciated.

Thanks,
Hal