Potential Deal
I found (4) four-plexes in East Dallas for sale at $832,700. All units are 100% occupied and the gross annual rents are $114,900 with total operating expenses (taxes, insurance, maintenance, management, vacancy, and utilities) of $33,908. Annual payments would be $37,500 (4.5% 10 year IO) or $69,900 (7.5% 30 year fixed). As I see it, the NOI would be 80,992 (9.7 cap) which should provide some descent cash flow either way, as I have been pretty liberal with expenses. It seems like a pretty good deal, although I haven't inspected the properties yet. What do ya'll think? Is it worth the time to investigate this further? The area of town is so-so, not a war zone but not where I'd want to live either.
-Chris
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It all comes down to doing you homework.
You seem to be on the right track. No one here can really verify the numbers. We might spot something that is way off or missing but you have to really make sure they stack up.
As to location, how do you expect to manage the property? Factor in the hassle or the property management costs.
Are you expecting to own them long term? If the area is so-so expect better yields but lower appreciation. Hence the deal on the way in might not get much better over 5-10 years.
Decide what sort of cash-on-cash return you want. It is cash you will not have available for other deals.
It sounds like you know how to do the numbers so pound the pavement and make sure there are no surprises waiting.
John
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I don't expect to manage the property. They current utilize an on site manager which they provide a unit to at $1/month and a small salary. I figured I would keep her in place, as I don't really want to be a full time landlord. Cash return isn't super important, as I don't need any $ for my own use. I'm using it as a retirement vehicle which I plan to do in the next 10-15 years.
I think I'm just concerned about dropping 800+ K especially since my mortgage broker says no problem. I've spent the last few days trying to convince myself that it is just 6 single family homes in disguise
-Chris
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