Is This An OK Investment?
This is my first investment. I'm receiving a lot of negativity about investing in real estate from the males around me. They seem to think it is not something a woman can handle . Well anyway ,I would appreciate your honest opinion on this particular deal.
I know it's not the "deal" of the century but is it reasonable?
4 family+one bedroom units $100,000
each unit pays 450$.
I pay heat=$318 a month on budget heat bill
1200 a year water and sewage.
1200 taxes which will go up double once the new purchase price catches up with the assessors office.
The 4 family is in an area where there is a lot of rehabbing going on. Looks like a good investment area.
Any opinions??????? 
What is the property insurance? Lets take $600/year for insurance. Then you are looking at somewhere around $500/month for cash flow assuming your P&I is around $600/month. Its a decent cash flow. If your property taxes double, then you still make $400 cash flow. I would go for it, just by looking at the numbers.
What is the possibliity of raising rents?
If I add in 10% vacancy and $50/mo/unit for repairs I estimate your cashflow to be about $67/mo.
Now if you can get that up to $475/mo then you cash flow turns to $157/mo
@$500/mo cash flow is $247/mo.
Keep in mind that if you are a good property manager you may not have 10% vacancy and you may not spend $200/mo on repairs. I sure hope you don't spend $200/mo but you may have some large expenses from time to time.
Basically I always look at the numbers worst case senario and if I like the numbers then, I surely will like the real numbers.
For me personally this deal isn't great enough to get a conventional loan but IF I could take the property sub2 AND rents are going up, I would be interested.
GOOD LUCK
Since there's more on the line than just money (!?), iit might make sense to pay an inspector to give it a good check over, and make sure there aren't any big unexpected expenses ahead, or needing immediate attention. Not that that would kill the deal, but it's good to have all the info possible, and you could use it during negotiations.
And about the taxes. They aren't usually based on your specific property, but on an average. So probably they wouldn't double right away. If they do, then you're sure you got a deal cos values are rising fast.
It's good that you're noticing what's going on in the neighborhood. It's usually favorable when you can buy an less-than-typical property in a nice, or improving neighborhood.
I'll address the first portion of your post. Every investor could tell you that when they started out, there were people who were negative and people who were positive about investing in real estate. And you can't really control that, what you can control is who you listen to. My suggestion to you is find more people who are positive about real estate investment, and surround yourself with them. As far as males who are negative, if you don't talk to them about you investments they will not have anything to be negative about.
Thanks for all of the comments and suggestions. I appreciate it. I especially like the advice not to talk to the males who are negative about this anymore!
With all of the numbers I have been juggling around I most definetely did not think of adding 50 $ a month for each unit for repairs. I anticipate repairs but that seems high to me.
Definately don't listen to those around you who are negative. Usually this comes from people with no drive to succeed who don't want you to show them up with your own success.
As far as the numbers my first question is do you need to pay the full $100,000.? If the seller would take $95,000. this would give you the $200. a month for repairs for the next two years. If I was willing to pay $95,000. I'd offer $87,500 to see what the buyers motivation level is. They may not take it but it certainly helps you get in at the $95,000. which is where you really wanted to be to begin with.
Back to the numbers.. I think the $200.00 a month for repairs is high unless the units are very dated. If these are 1 bedroom units then the number of occupants should be 1-2 which I've found leads to less wear and tear on the property. That's the good news. The fact that they are 1 bedroom units may lead to the 10% vacancy rate as stated above unless you have info showing long term tenants. Have you got any info on this? Are current tenants in leases or month to month?
Lastly, when was the last rent increase and do you think there's room for an increase?
I think the answers to these questions may help you make your desicion. The other question is what are your goals? Are you looking to get just one property with some cash flow and hold it for a while to get your feet wet? Or do you want to build a portfolio of several properties? If this is the case how would buying this first one effect your ability to get into others?
I hope this has some help instead of just raising more questions!!
Good Luck and welcome to REI!!!
Thanks zaxdad,
The units are in very good shape. I had an inspection yesterday and the inspector said he was very impressed. All 5 big areas were in good shape: foundation, roof, plumbing, furnace, electical. Very minor concerns were revealed. One tenant has been there13 years, another 5 and another tenant just a few months. One unit is empty. The two long term tenants are staying and they are very neat and clean.
There is new one year lease in place. I could see raising the rent a little in one year.
I want to buy more properties. I can probably buy one more soon and then have to wait to generate more cash.
Thanks for all of the help. I appreciate it.