Q's on multi-unit aquisition - Posted by Bill(PA)

Posted by Bill(PA) on January 25, 2002 at 19:14:57:

n/t

Q’s on multi-unit aquisition - Posted by Bill(PA)

Posted by Bill(PA) on January 23, 2002 at 11:02:13:

Hi,

I’ve been working on trying to wholesale deals, but I’m looking at a quad as a possible deal. I have no experience with multi-unit deals, so I’m asking for a little help.

  1. All units are rented. I would want to put on FHA financing and live in one of the units. Am I required to honor all existing leases through the current landlord or can I renegotiate with all of the tenants when I aquire the property(so I can have my own leases signed, while living in one of the units)?

  2. Would I be better off trying to find sales comps in the area since it’s a small multi-unit property, or should I use an income-analysis approach(since there aren’t that many quads in the area)?

  3. The property does not have individual utilities, AC or laundry–but there is an unfinished basement. Would I want to individualize the utilities, add AC and washer/dryer amenities in the basement to raise rents?

Any other advice?

Thanks!!

Bill(PA)

A’s on multi-unit aquisition - Posted by David Krulac

Posted by David Krulac on January 23, 2002 at 11:58:50:

Bill,

  1. By Pennsylvania law a new owner must honor existing leases, but there is nothing to prevent you from negotiating wiht existing tenants for an early departure.

  2. The income approach is more appropriate for larger numbers of units, but you should use BOTH methods, income and comparable sales to determine the value of the property.

  3. Depends on how costly it would be to add individula utilities, AC and laundry. I have added all three. If the heating system is hot air and ducts are in place that helps to lower the price of AC. What is the current heat source, oil, gas or electric? Some landlords install electric baseboard which is the cheapest to install but the most expensive to operate. I recently looked at a multiunit that the landlord didn’t knwo how to operate a multi zoned hot water heat system, so replaced it with electric baseboard. The tenant told me that there electric bill was $400 a month. They were also moving, without waiting for the winter to end. Laudry can be profitable if there is enough useage. ^ units would be better, but if there is no competition and the unit sizes would indicate more tenants then 4 units might work. A 3 bedroom unit with more people will use a laundry more than efficiencies with 1 person in each. Again in all three additions run the numbers and get good realistic solid estimates. Figure out the payback and whether it is cost effective.

David Krulac
Central Pennsylvania