How Does This 5 Unit Deal Sound?
Total building size: 3,194 s.f
Sale price: $337,050 or $105/psf.
Unit detail: Unit # Size: Current rent Market rent
1- 650 sf $550 $780
2- 600 sf $465 $720
3- 400 sf $385 $480
4- 350 sf $385 $420
5- 500 sf $450 $650
Total: 5 units 2,500 sf $2,235/mo $3,000/mo
$26,820/yr $36,000/yr
Property taxes: $1,071. Will be adjusted next year after act of sale. I estimate $3,000 annually.
Insurance: Waiting on a quote from my agent.
Estimated debt service: $25,116. Assume 80% ltv, 7%, 20 year amortization with 5 year balloon.
Value as condos: Approximately $200/psf. Condos have appreciated by 10%+ over the past 2 years.
Renovations to condo: Approximately $80k to $100k.
Thanks
Your data is slightly confusing. In the begining you say it is 3194 sf. then you say it is 2500sf. if it is 5 units and 2500 sf then per sf data will be close to $150/sf and not $105, even at 3195 sf it would be more like $115/sf or so.
If it is 2500, then your gross sell price will be $500,000, and your cost will be 337+100k=437 k. after deducting for 6% commision, closing cost, and financing cost, there does not seem much money left this deal. If it is 3194 sf, then your gross sale price will be 640k, in that case this may be a nice deal.
Hello Ashwin,
the 3194 is total building but subtracting hallways and stairs so the 2500 is total of the living 5 units s.f. and the converting is not right away its maybe 3 years down the road the concern now is cash flow with the gross income of 26,820/year and the potential 36,000/year after raising rent .
Plus I am not sure when converting could I add on some of the extra s.f in the building 3195-2500= 695 to the condo units when I convert.
Thanks
I think considering 35 to 40% of rent as expense, you will likely have a negative cash flow. But if you are converting to condo after three years at 5% appreciation the new sf price could be 230+/sf, and the deal may come out ok. I would worry about the financing for meeting the -ve cashflow and renovation cost.