Deal Guidance and Advice On My First Property

[Eddie L.]

Buying my first multi-family and I'm in need of advice. The list price is 125k and purchase price is 115k. Three of four units are leased for a total of 1,325. The repair on the fourth unit is about 5k and repair to the roof is about 10k. The area is not appreciating and is home to many individuals on the sex offender registry. There was negative population growth of the city of about 2% in 2017. The current CAP rate is 8.6% and Cash on Cash is 17%. The sales comparison approach value is 135k and income approach value is 156k. Is this a good deal? Should I be concerned with high crime and quality of tenants?

[Rob Lee]

Sounds like you are considering a purchase in a D neighborhood. Location, location, location. My wife and I have been investors since 2013. We have investments in A neighborhoods and a C+ neighborhood. We have had little to no issues with our tenants in the A neighborhoods. Paying rent on time has been an issue for tenants in the C+ neighborhood even before the pandemic. Tenants in our less expensive units have also done the most damage to our property. Also, we have only had to file for eviction against tenants in the C+ neighborhood. If this had been our first property not sure my wife would have been on board with purchasing more. Hope this helps.

Rob