Four Doubles In A Good Area Of Town.....what Should I Pay?
I have a lead on someone looking to sell four doubles in a pretty hot part of town. All 8 units are rented and the rent prices are actually pretty conservative.....they have room to be bumped a little on turnover.
The total monthly take is just over 6,000. Tenants pay everything and even cut the grass. I'm still waiting on tax and insurance numbers.
What do you think? Worth taking a shot on? If so, how much would you pay for the package? Normally I look to buy commercial property, but these doubles peak my interest due to their location....but I don't want to overpay for them.
Thanks
NOt enough info to put a value on these. HOw old are they? will you one the ground? How motivated is the seller? What deferred maintenance do they have?
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Stock,
* Yes I would own the ground
* They are all around 45-55 years old
* The roofs and HVAC systems are new within the last 2-3 years
* I have not been them yet, but the current owner has had the same tenants for a few years and he says they are all in very good shape. We'll see when I get in there to view them.
* He is selling them becuase he wants to buy a commercial property and will use the proceeds from the sale to do a 1031 exchange.
* I think he is thinking he can get around 760K-800K. That's what HE thinks.....we'll see.
To get a ballpark value use the simple formula gross monthly income * 12 * 7.
So when I first started in this building I worked for an old german guy who had an expression.
"any building anywhere anytime is worth 10 times its annual true net operationg income.
9 times is a good deal
8 times is a very good deal
at 7 times you come get me. I'lll buy any building anywhere anytime for 7 times its net."
that's a pretty simple, yet very effective way to look at it!
COMKING haas it right in a nutshell. In reality the MH's are worth very little on a resale basis, a couple thousand each. I can buy 20-30 year old doublewides for 2-4K each all day long. I have had a 96 double for 14K (5 yrs ago when it was 3 years old).
The only real value here is 1. in the land. 2. in the cash generated by the properties.
One thing to check on is the amount of deferred maintenance and any new codes that are coming into play in your area. Here the pre 84's used aluminum wireing and are now dirt cheap at times going for nothing or $1500.
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stockpro....I think you misunderstood my original post. I'm talking about doubles homes, not double wide trailors.
Duplexes! I see now
keep some positive cash flow
A general observation...
The details for the deal have come out in dribs and drabs. Even the terminology was fuzzy (doubles as opposed to using the right term - duplex).
I think you need to work up a more through analysis. You can present it here or keep it yourself. Work all the numbers into the analysis. Budget for maintenance, etc. Even if the tenants do it all it is still your legal responsibility if you become the landlord. Price everything in and then see how the numbers stack up.
As the seller is a professional investor see what they tell you. Also consider what they are not telling you. There might be nothing being held back or maybe something really key.
To seek advice you need to be able to explain the details otherwise we are shooting in the dark and you might get hurt.
John
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