Please assess this deal

[fumbrunner]

Private sale.

5-plex, mix of 2brs and 1 brs tenants pay heat and hydro.
Winnipeg (area is probably 2.5 out of five)
Suites are all in good shape, new windows, etc

Price 300K
Rents 3K per month
Gross monthly expenses (15% of gross rent - insurance, maintenance, property management) $465
Taxes 200 per month
Water 100 per month

PI @2.25% for 35 yrs: $826
OR
PI @6% for 25 yrs: $1546

Both assume 20% down

Cashflow under scenario 1: $1300 a month
Cashflow under scenario 2: $634 a month

This is a private sale that I may be able to swing. He is a family friend looking to retire and unload the property but is trying to save the realtor fees.

What are your thoughts?

 

[Thomas Beyer]

sounds expensive .. unless in great condition and great area !



your expenses are WAY WAY LOW .. assume expenses are $20,000 / year for a 4-plex .. before mortgage payment



MB is rent controlled .. at that price you have no cash-flow and headaches .. offer maybe 200K .. MAYBE ..



Items to consider when buying an apartment building: http://myreinspace.com/public_forums/Real_Estate_Discussion/62-14548-Buy_vs_Build.html



Multi-Family Primer in May 2009 Issue of Canadian RE Magazine:

http://myreinspace.com/rein_members_only/Members-Only_Discussion/81-10996-Multi-Family_Primer_-_May_2009_Issue.html

 

[Mitch Collins]

Hello;

This is a deal I would look a little closer at. The numbers only give a part of the deal..you need to ask the following questions;

1. Is this a `legal, conforming` property, or is there additional risks there? If a suite got shut down, how would that look like on the cash flow side?

2. Is the building is good shape, or have you got major initial renovations to look at from the beginning? Is the R+M figure you provided realistic for the asset?

3. Vacancy and PM and R+M will probably trend higher than 15% depending on the property, might want to double check the figures and see if there are any issues with deferred maintenance - furnace, roof, etc.

4. Have you verified the rents to ensure what you`re being told?

If all of these things pan out and you have an exit strategy, the numbers seem promising enough!

Warm Regards;

 

[Rickson9]

This property would be worth $200K to me.

For me, there`s no point asking questions about the property if the price is out of wack. I would just be wasting the Seller`s time.

 

[fumbrunner]

Thanks folks. I appreciate the feedback. I`ll see how much he`ll come down from his 300K ask. Sounds a bit overpriced given the comments here.

 

[invst4profit]

With a income of only 3,000/ month it is way over priced and as suggested you can expect expenses to be a minimum of 35% and likely much higher depending on condition. At $300,000 it probably isn`t worth your time pursuing it any farther. If he does drop his price it will have to be a lot closer to $200,000.