Possible First BIG Deal - Thoughts?
My partners and I are getting into real estate and would like to move into bigger deals. The two partners rent single family homes right now, but we are interested in multi-family units above the typical 2-4 unit buildings. There is an opportunity near me that we've found, and I'm curious about the numbers and potential deal. Here are the numbers:
13 Units total - 12 - two bedrooms, and 1 - one bedroom.
12 units w/ 3 bdrm.1.5 baths each,avg. rents over $800.00 each.
Over $60,000 in rehab in the last year, on site care taker in 13th unit.
6 parcels included, some buildable sites.
newer hvac wall units, d/w, refrig.stoves
The owner may also hold a second which would certainly help with the down payment.
Semmi Annual taxes: 5883
Gross Income: 116,400
Net Operating Income: 72,965
Asking Price: 600,000
The property sale history shows that it sold on 9/24/02 to a local bank for 380k, and then again on 3/11/03 to the current owner for 500k.
Any thoughts or suggestions?
Would you recommend this deal as a first step from small rentals?
Your NOI may be slightly high. You didn't give us a price on the property. That said, if your numbers are correct and you can pick it up for $550K, by my calculations you've got nearly a 13% cap rate and $29K per year positive cash flow at. Now it all depends on how you finance it and what the price is. If there isn't much defered maintenance on it and you can get it on favorable terms, the most I'd pay for it (assuming all you said was accurate) would be about $650K, which would be an ok deal. Nothing to brag too much about, but ok.
I say go for it, if the owner is willing to hold a second then he is clearly flexible and the money is there. What has the apprasial shown? If you are also recieving value then if all else fails you can still get out with some money in pocket.