Package of Multi-family Homes

[Sean Demory]

I found a deal that is over my head. Its a total of 6 quad-plexes, 2 duplexes, 1 single family. 1 quad-plex and 2 duplexes are renovated with current tenants at $550/month. The remaining 5 buildings are in need of repairs. Major repairs. Need roofs, gut to studs and start over repairs. It's a mix of several duplexes and quad-plexes. I believe all units are 2 bed 1 bath. The deal was originally at $1.1mil but it fell through with someone else. Current asking price is at $900k. It's under contract right now, but it sounds like buyer is trying to get out of the contract. I currently have 2 single family rentals with 3 years experience self managing. I've never raised private capital. I have done some major renovations in my life, so I'm comfortable dealing with contractors. From what I know, seller is motivated, been on market for 2+ years and seller wants to cash out and retire.

I expect units to rent around 500-600 post renovation. My current 2 rentals are in the same area, and its very stable with minimal appreciation. There is also a solid demand for housing in the area. This looks like it would be well into positive cash flow to me. How much should I be budgeting for operating expenses. Does this look good on paper? What else am I not thinking of and should be adding to cost? How much should I be setting aside for renovation costs? I'm thinking $300k for repairs.