Asking - $590,000
14 Units all 1br/1ba
C-Class
Built in 1880's
Fully Occupied - Section 8
Last Sold in 2015 for around $275k
Building is in good condition for age with updated fire, electrical, plumbing, heating systems.
90%+ of the buildings in this area are from this period.
Best friend's father in-law is a highly rated builder in the area and has renovated/maintained this building over the last few years. His opinion is that it is a no-brainer, and that if it weren't for the section 8 program he would buy it him self. He doesn't believe in accepting money from the government (his words).
Cap Ex in those 5 years were around $80k renovating 6 units and installing a new fire escape.
renovated units (6 @ $550-$650)
non-renovated units (8 @ $450-$525)
Average rent is $525
Total income is $7350/mo ($88,200)/yr
(some additional with laundry - couldn't get a straight answer)
Average rent in the area for a 1br/1ba is $600-$750
Section 8 limit for the area is $900 for a 1br/1ba
Yearly Expenses
Taxes - $5822 / yr
Insurance - $2360 (est.)
Maint. - $8820 (est.)
Cap Ex. - $7961 (est.)
Electric - $300
Sewer / Water - $6350
Lawn & Snow - $2600
Pest Control - $400
Trash - $4200 (est.)
Vacancy - 10% - $12,600 (est.)
Management - 10% - $12,600(est.)
Total Expenses = $43,712 (49.56%)
Offer $500,000 (too high? Offensively Low?)
Rehab $30,000
Down Payment & Rehab = Heloc $205k @ 2.5% ARM
Mortgage = 325,000 @ 4.5% 30/yr Fixed
Financing Costs = $25,000 / yr
Cash flow = $1600 / mo
Cap Rate = 8.39%
COC = 9.47%
With all rents increased to $650 (additional $60k rehab)
Cap Rate = 10.24%
COC = 13.32%
Would take me about 9 years to pay back the HELOC @ current rents - but I would do it in 4-5 years with additional payments.
Very few comparable sales in the area, not many building over 4 units, but a ton of 2-4 unit properties. Generally though $50k/door is a fair price in this area with updated duplexes going for around $75k/door.
Population / jobs in area are stable but not increasing, median income in area is around $40,000, age is above average for state.
Would be first investment property. I've been looking at 2-4 family units in this area because I have a good network there, my family is close, and it is a 3 hr drive from my home in NYC. Have access to another $90k in cash/brokerage/credit as a reserve.
Other thoughts are picking up a turn-key 2-family "cash" around $150k with rents around $800-$850/mo ea.
OK - tear it apart. I know now is not a great time to buy multifamily - but I would enjoy your thoughts.