- Price: $884,500
- Gross Rent per seller: $92,700/yr
- Expenses per seller: $30,839/year (includes property tax, insurance, repairs, utilities (water only), and landscaping)
Two 4-unit buildings next to each other on a ~7,000 sq ft lot. Land value alone is worth an estimated $685,000 (I’m fairly confident in this land value estimate since I live in the neighborhood and watch the market closely). Total building square footage is 5,200. Class C property, full occupied. Most tenants are month to month with two of the leases ending later this year.
All units are separately metered for electricity and landlord pays for water and landscaping (included in CapEx above). All units have window a/c units only (Houston, TX); no central a/c. The property does not have any gas. Roof on building 1 is from 2015 and roof on building 2 last had repairs in 2019 (unsure of the age of the roof on building 2).
My only experience being a landlord is owning a turnkey single family home with an easy tenant. Is it a bad idea to buy a 7cap 8-plex near my house?
byu/htownnwoth inrealestateinvesting
Posted by htownnwoth
12 Comments
Maybe.
Maybe not.
Share more details. What is the market like? Is is economy generally growing? Population? Is it shrinking? Wha will the market look like in 10 yeares?
How will you handle maintenance. How profitable will it be. Can you swing the payment if 2, 3 or all 8 of your tenant stop paying? How long? What is your emergency fund. Will you finance the purchase?
It’s 8 headaches but you screen new tenants eventually as they move our keep the good tenants.
If it’s a solid investment then it’s worth it.
I can’t help you, I own two turnkeys and that’s it. I’m interested to hear the responses tho.
My first tenent is great. She’s been there for 2 years. The tenant in the second house is terrible. Constant maintenance issues. She’s been to court numerous times for eviction but always manages to pay last minute and can stay due to the local laws. She’s month to month now so I can get her out if she doesn’t pay but I’m dreading the turnover cost. I know it’s going to be a nightmare.
Cap rate is the dumbest way to measure rentals.
Completely market dependent
Hey keep in mind with Houston your property taxes will increase 80-90% of PP & also idk insurance quote for the area, but can be expensive.
Also I’ve underwritten many small multifamilies in texas.
Key issues:
1. Often cash accounting making the stated NOI unreliable
2. You need to underwrite for 3rd party property management costs & expenses, not the in place
3. Mom & pop operators often make a deal look better by not paying themselves fees-> going back to adjusting your own expenses
Going from a turnkey rental to two fourplexes seems like a big jump to me. The numbers aren’t great (from the price and gross rents it looks overpriced to me).
I wouldn’t be in a rush to get into this deal.
As long as you are okay with manage 8 more tenants, handle more complicated maintenance and repair issue, more common area issue and maintenance, you can do it
It does heavily depends on your ability to handle way larger workload in this business
1930 means possible knob & tube wiring, galvanized or lead pipes, potentially no insulation. Probably lead paint.
Awful return
If you found this on market…RUN. Absolutely 0 reason a class C should be a 7 Cap. Total horseshit
He’s netting $60k a year doing nothing and wants to sell it? Sounds fishy