Posted by TKinTX on May 04, 2006 at 13:14:27:
Ah, yes, the dreaded repairs. Yes, these are 2/2s. I look at the maintenance as 12 units that have less maint than 12 SFH. But on the flip side, there is almost no appreciation in these units (except whatever I can make via rental income appreciation.
I’m not sure I’ll move on’em… just wanted some feedback, for which i am greatful.
Noob here… Would this be a good deal ? - Posted by TKinTX
Posted by TKinTX on May 03, 2006 at 13:40:31:
My first post… First, I have to say “Thank you” to all of you. I have been reading the forums and articles here for a couple of years, thinking, looking, watching MLS, etc… Joined the local REI club, and I am closing on my first SFH with some partners on Friday - we’re getting our feet wet and spreading the risk on this one.
While that’s going on, I’m also still looking and I wonder if this would be a good deal?
Four duplexes asking 520k ($130k each if bought separate). i know this would not be a good deal, per se.
I’m thinking of offering 420k for all four. i think this would be a good deal, but I’d expect them to counter in the middle, so let’s say 470k for the high end/cutoff.
I am assuming $0 down NOO with FICO in 680 - 710. (so probably around 8%)
Cash flow: 900 to 1300
i haven’t looked at the place for maintenance, etc. Any good ballpark on what to include %-wise?
i’m just running numbers and thinking about an offer.
also, i think i can bump the rents up if i allow Section 8, which I intend to do. not a lot of appreciation in the area, but lots of renters.
WWCREOD?
Thanks!
Re: Noob here… Would this be a good deal ? - Posted by The Central Scrutinizer
Posted by The Central Scrutinizer on May 07, 2006 at 07:35:21:
Hi, No Boob,
What happened to your boob?
Re: Noob here… Would this be a good deal ? - Posted by DoubleJ
Posted by DoubleJ on May 03, 2006 at 20:30:32:
I am assuming $0 down NOO with FICO in 680 - 710. (so probably around 8%)
Are you saying you think you will get an 8% rate on 100% financing for NOO in one loan? You MAY get that on the 80% first, but the piggyback 2nd you take wont be pretty like this.
Re: Noob here… Would this be a good deal ? - Posted by Natalie-VA
Posted by Natalie-VA on May 03, 2006 at 18:17:40:
TK,
Most appraisers would value a duplex using the sales comparision approach, so in addition to working your monthly numbers, you really need to know what recent sold comps are in the area.
–Natalie
Re: Noob here… Would this be a good deal ? - Posted by Joe
Posted by Joe on May 03, 2006 at 17:26:48:
4 duplexes … that’s 8 units. What are these, 2/1’s, 2/2’s? Cause what I hear you saying is this: 8 kitchens, 16 bathrooms, 16 bedrooms, 8 roofs, 8 furnaces, etc. That’s a lot that can go wrong. Is 900/mo to 1300/mo enough cash flow to cover all of the problems you’ll encounter? And with this many units, the odds are against you. Assume the average furnace needs a repair within 6 years of installation. You’ve got 8 units, so you have an 8/6 chance of needing to repair one of them this year. That means you are guaranteed (in theory) to make a repair this year. This could be an insignificant $200 repair, but are these all brand new furnaces? What if they’re all “relatively new” (i.e. 5 years). And the average furnace is replaced after 15 years. You now have a 8/10 chance of replacing a whole furnace within the first year. That’s not a guarantee, but those odds are pretty high. And that’s a $2k repair - there goes 2 months worth of cash flow.
I don’t know what the answer to your question is. But with this many units, you need to be thinking repairs. So I’m throwing it out there. Normally with this many units in an apartment complex, the advantage is that you have 1 roof, 1 big water heater, 1 big boiler. Sure, everyone goes down when it goes down, but it’s only 1 thing to repair.
Personally, just pulling numbers out of my arse, you might want to think about cash flowing at a minimum of $200/unit/mo (even accounting for maintenance, but maybe not repairs unless they are obvious at the time of purchase).