6 Plex Need Some Input
ok here's the scoop a 6 plex for 250,000 built in 1933 fair shape all the units are rented Unit 2 rents for $535 per month. Units 1,3 & 4 rent for $435. Units 5 & 6 rent for $470 each. I asked for an expense sheet. I want to know what everyone thinks good bad. There is also a coin op laundry on site the realtor say's it brings in 2-300 a month is that realistic. I appreciate all the help.
it sounds good on the surface. I would definitely get that expense sheet. The laundry amounts sound right as well, especially for a family type 6-plex. Dont forget to get a handyman in there to figure up the costs of fixing it up, and to check with the code police. Also see what his turnover is make sure they are stable. Check the roof, and see when the past repair or replacement was, that will be your biggest expense. Make sure the foundation is in good standing as well.
Since the building was built before 1973 you will want to make sure there is no lead based paint on site. Your environmental Phase 1 will find if there is a problem. Also given the age of the building hopefully there isnt any lead based piping for your drinking water in the place as well.
It sounds like a good deal, but because of the age of the buiding, make sure your deposit is fully refundable should any major environmental issues, or building issues need fixing. oh yeah, Dont forget to get the deposits that the tenants put down at closing.
Good Luck,
Kyle
Hello MCQ72,
The numbers are not too good as I see it. The problem is the fact that you will have to apply for a commerical loan. If you have never applied for a commerical loan before, best to look into it before getting to far into this purchase. How much work will you need to do to the property once you purchase? How much maintenance will you need to do in order to keep the laundry going? What are you cost for water usage? How are the utilities set-up? What kind of turn-over do you have with these units? How much of your time will this sixplex consume? How old are the stoves, refrig, heating and air units? Things like picking up paper, cutting grass, running down non-payer, showing the open units, fixing leaks and other small repairs.
MCQ72 these are the things that I would be concerned about. Lastly that asking price of 250k is a bit high compared to the income that it will produce for you. I see 220000k max offer and that is if all the things listed before are OK.
I also have the abilty to pick up mobiles in the same area for aroung 44-50k but they rent for 650-750 I'm wondering what would be a better option.
Well, it all depends on what direction you want travel. Do you want to be a landlord? Do you want to buy and hold or flip for a quick profit? Are you wanting to issue homes under a land contract? What is going to wok best for you and your investment strategy. I personally don't own any mobile homes, I don't think they appreciate as much fixed homes, but that is just me. Happy investing
I have some more up to date numbers on the 6 plex. total rents recieved in 03 was close to 28,000 not including the 250 per month on the laundry so that brings it up to around 31,000 income. expenses 2400 management company which I could remove,owner pay's electric which ran 2339, sewer 1125,water 233.54,garbage 635, repairs +maint 2150.64 net income=22,117 seems like a bust to me unless you guys see places I can shave them down like management company.
Okay Mcq
so theres a net of 22,117 and the asking price is $250,000.
Thats an 8.8 cap or a net rent multiplyer of 11.
not a stupendous deal but not a horrible one either, especially given that its a 6 unit which tend to trade at negative cash flows.
Options (there are always options)
negotiate a lower price.
get the seller to carry a note at a lower rate
check to see if rents are comparable in the market or if they can be raised
removing the management fee from the equation is probably a bad idea (though people do it all the time on small buildings which is why they almost always trade on negative cash flows.)
move on.
Mark
I appreciate the help more questions though. I was wondering what kind've loan to you typically get on a 6 plex? someone told me it has to be a commercial loan and usually on a 15 year note, that does mean it would a negative cash flow with all the expenses is it worth it???seems wrong buying a property and losing money each month but I'm a newbie