I closed on this property last week. It was originally listed for 359,900. It was on the market for 6 months before I went and looked at it. It is a four family property. The four units are a one bedroom one bath, a two bedroom one bath and 2 three bedroom one bath apartments. When I looked at it, the one bedroom had just signed a one year lease, the 2 bedroom was on a month-to-month lease at 800/month, one of the 3 br was rented on a month-to-month lease at 1050/month, and the second 3 br unit was vacant. Two of the rented units are underperforming. I believed i could rent the 2 bedroom for 1000 and the three bedroom for 1200.
After three months of stalemate, I agreed to a sale price of 265000. Yes, you read that right, I had my offer accepted at 94000 less than what the owner was asking. How did that happen? As you can see from the pictures the building needs new siding and new windows. I plan to use the cashflow over the next two years to fund those upgrades.
A couple of issues with the property as full disclosure. There is no off street parking right now. There is not enough room between houses to put in a driveway. I hope to get the city to approve a permit to pave in front of the property and place four off street parking spots there. That will improve the rental rates a bit. Secondly, all the apartments utilize a gas stove and gas heat. They all have baseboard electric heat as well, but use the gas heaters primarily. As a result, I will need to replace the ovens with electric units and remove the gas heaters. Although not pressing, I will take care of it over the first two years as well.
Financial Breakdown
PITI: 1745
Vacancy: 10% (395)
Maintenance: 10%(395)
Property Management: 377
Rent Collected: 3950
Cash Flow: 1038
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