Does this deal look good?

[Barry Wallace]

Hello Everyone,

So I recently came across a 9 units complex that is completely rented and grosses $4900 per month. The owner is selling all his properties to retire and this is just one of his now. I have listed the details below along with the financials. Can anyone tell me if this is something they would move on?

Purchase Price - Asking $349,000, would consider $320,000

yealy Grosses - $4900 / $58,800

Yearly Expenses ( Property management, Insurance, Maintenance, Utilities, etc..) - $24,000

With financing at 5%/20-year private lender with only $6500 out of pocket upfront, my monthly total expenses would be $4,393.27 with debt service and a total income of $4,900. This gives a $540.39 monthly cash flow while still covering all the expenses and anticipated items. The owner recently remodeled a lot of the building and most tenants have been there for 4+ years and don't want to move. I believe the monthly rental rate on some of the units is low and it would bring it $5400 if increased over time.

I appreciate your feedback.

[Mack Benson]

I think it depends on your goals for the property. Does it have a value add other than raising the rents? Are you looking for an appreciation play or solely cashflow? For each of these approaches what is you minimum acceptable return? I ran your basic info through my calculator and it looked like it may come in at about 9% cash on cash at takeover. For me that isn't terrible but I'm also looking more like $100-115k per door, not $35k so it's hard to make a direct comparison. 

One thing that I see frequently overlooked for expenses is the adjustment of property taxes? Some states revalue a property at the close of a sale while others are on a specific schedule of 1-4 years. I'd check with your county assessor to see what a sale of that price would do to the value of the property. I've heard some cases where the property taxes double after a sale and it completely destroys the returns.