All Forum Posts by: Michael Spangler

@Mary M. I have mainly been researching multi family residential (original plan was to house hack), so the quadplex is something I have an (academic) understanding of. The wrinkle here comes that there are two quadplexes on the same lot and that they are currently held by an investment company, so (I believe) both of these things mean they would fall more into a commercial deal than I am familiar with. The rent roll shows their current rents totaling $4425, with one unit vacant (so full occupancy would be around $5k).

I am currently waiting to see if he will send me more specifics on the operating expenses of the properties since he has held them to more accurately determine NOI and CapEx/potential CapEx.

@Michael Dang I've asked and am waiting on a response, I expect the answers to the first questions to revolve around the fact that this is a market driven by college student housing, and these are sold in groupings of fourplexes and so they are priced out of the "parents buying a property to let their kid live in" market. I also believe they are underperforming the market (which typically rents by the room, however the rent roll I was sent shows these are currently rented by the entire unit), so I believe I would be able to increase the NOI by fixing this oversight.

The properties are right next to the campus, so crime, schools, traffic and amenities are not much of a factor. Since it is student housing, (and knowing the university's response) I don't think rent collection would be an issue (since most would be paying with student loans/parent funds). I am looking to buy and hold, so I am not looking at more near-term exit strategies. I believe the location relative to the school means the student market will effectively never dry up, and the university is expanding and being backed by the state (TX) to expand the facilities it provides to technology companies across the nation as a research institution.

Thank you @Guifre and @Charles. Those are excellent questions to ask. They bought the properties in 2016, and then started trying to sell them in 2018 with no price changes since then. It appears to be a very slow market, which is why both of the listings they are selling (the 4 quadplexes and another 2 quadplexes) have stayed on the market for almost 2 years. I don't expect them to have done all maintenance, but when running the numbers to make the deal NOT work I have to finance 100% of the loan, fix something for ~30% of the loan value (taking out another loan to do so), and also have slashed rents to 60% of market value. Even with all of this, the property breaks even and doesn't cost money.

I found a great multi-family deal (four quadplexes that meet the 2% rule) and after some research, they could cashflow over $200/door easily. What questions should I ask the seller? The property is held by an investment company that promises return in 2-5 years, and they have held this for 4. I am reasonably sure they are selling in order to meet their fund objectives not because they need work, even though this is a amazing buy and hold property. Any help?

I'm aware of those numbers, and I factored those in. Below is the full breakdown for an absolute worst case scenario and another where nothing horrible happens but it still underperforms.

Costs:
720k loan @ 3.75%
600k purchase, and then something not found in the inspection costs 120k to fix (very unreasonable)
6k closing
6k annual property taxes
$250/month insurance
7% repairs (again, collective worst case)
8% vacancy (very far above average)
7% CapEx
10% property management

$6212/month expenses


Income:
8 units, 2bed 1 bath
$400/room (average rent is over $500/room in the area)

$6400/month Income

Cashflow: $187/month. This is still positive, but absolutely terrible events.

Slight underperforming scenario:
600k Loan @ 3.75%

6k closing
6k annual property taxes
$250/month insurance
7% repairs (again, collective worst case)
8% vacancy (very far above average)
7% CapEx
10% property management

$5656/month expenses

Income:

$500/month/room (still below market value)

$8000/month Income

Cashflow: $1831/month, or $228/unit.

When given a chance to meet average rents, but keeping the high vacancy, CapEx and repairs, the cashflow goes up to well over $2k/month.

Can I get other eyes on the numbers for this deal? It looks like its very good, however I am new and probably missing something.

Description/location:
2 quadplexes in a college town, <3 miles to a centralized campus (easily bikeable), on a bus route, walking distance to grocery stores and restuarants. Having graduated from this school, its in a very good location where vacancy would be extremely low. The market has students sign year long leases even knowing most will move home for the summer and the unit will be empty (so it/when rehabbing is desired, the possibility exists to update it and use it as a perk to keep the same tenant). The units do not appear to need any renovations done, however I have few pictures/information on when it was all last done.

Numbers:
600k listing
All are 2bed 1 bath units, and in the area, renting a room is very typical
Room rents are between $550 (a room in a SF, condo, or townhome) to ~$900 (1bed 1 bath condo/apartment where you pay to live alone).
Rents for 2/1's that are not buy the room could be expected to be in the $1k range, not higher than $1,200.
No HOA
Taxes look to be around $6000 annually.

As I run these numbers, even in a near worst case (100% financing, 5% vacancy, $625 rent for the whole unit) it still cashflows. In a more realistic but still conservative estimate (100% financing, 5% vacancy, $400/room [$800/unit]) it is cashflowing a little over 1k/month.

Is there a large number I am missing somewhere? I am including taxes, closing costs, insurance, property management, some monthly expenses (its quadplexes, so trash mainly). It looks like a stellar deal to my (inexperienced) eyes. What am I missing that has had this sitting on zillow for almost 2 years?