Opinions on 6-plex Investment in Surrey, BC

[balbas662]

I am looking at this investment in Surrey which consists of five - 2 bedroom units and one - 1 bedroom. It's priced at $900 000 which works out to $150 000/unit. I have read multifamily reports of units selling for 105k-120k in New West, 120k being in smaller buildings. New West I would assume would generally be more expensive so this makes less sense now. Is the issue that it is only a 6-plex and therefore the per-unit price is a lot more?



Anyone have an opinions about this being priced at a fair value? It works out to an apparent 5% cap rate.



Any help would be greatly appeciated.

 

[Thomas Beyer]

Sounds about right .. But obviously more details are required such as rent roll and expense summary, unit size, condo conversion potential, location, rental upside, balconies, all suites above ground, in-suite condition, status of major items like roof, boiler, hallway carpets .. At 900k you may be 200k over or it may be a steal .. Hard to say with such little info. You want to buy my used Lexus ? It is only $10,000 ! Is this a good deal ?

 

[balbas662]

More Info:





Building was built in 1964, over all looks good. 5 of the 6 units are renovated, new boiler in 2009. Newer 2 ply torch on roof, 5 suites have fire places, back decks and stairs redone. Supposedly well managed, the rents are decent at $850 roughly for four of the units and the other two a little lower. The common areas are updated and a coin laundry is in place.





I don`t see much for upside potential in rents considering most of them are hide, maybe $100 more for one unit. Not concerned about condo conversion as I am looking at buy, hold, rent. With the 5% cap rate as I stated earlier net income is at $46 000 a year.

 

[ChrisDavies]

I like the suite mix - 2 bedrooms are easier to rent out than 1 beds and hold the possibility of being turned into a condo. It also sounds like they've done some of the big renos, which helps to balance out the fact that you're limited on raising the rents. Other big expenses to watch for in a building that age include windows, siding and decks.



You're right that smaller buildings are more expensive - lower total cost so more people competing to buy them. If you've got cash and are in it for the long run paying a bit of a premium won't kill you.

 

[Thomas Beyer]

CAP rate will be A LOT lower than 5% .. With a monthly rent roll of perhaps $5000 or 60,000 a year and expense of about $12,000 at least .. More like $18,000 you will have an NOI of $42,000 per year or a CAP rate of a hair over 4%. Many expenses are hidden or done by the previous owner say R&M or property management. You decide if 4% is the best you can do in real estate.

 

[invst4profit]

I believe Thomas is being too conservative with his estimates on operating costs. If you intend to hold long term I would guess your NOI would likely be closer to 37-38,000/ year maybe even less. Definitely no where near $46,000 that's for sure.

 

[Singh]

Hi Pal,



I know which one are you looking at it, it was actually listed last year for about $499K, but improvements were needed. If I were you, I would double check to see if the stats work out. I think I know which one you are talking about in Cloverdale, and think if you have that money then buy something in Vancouver in the downtown east side, little more headache, but I think you have a better chance for appreciation.