Multi Family Property Saga

Multi Family Property Saga

I have been working with single family houses the last few years.  I have decided to buy multifamily.  I contacted my realtors and told them that I want to find a 30 unit complex for $800,000.  She came back with 23 unit for $850,000.  It has been rehabbed with granite counter tops and hard surface floors.  It has a small laundry and is made up of 5 duplexes 2 bedroom 1 bath 12 – 2 bedroom 1 bath apartments and a single family house all platted as one property. It has a Net Operating Income of $79,000 on $148,000 annual revenue.

Now to look for operational improvements to increase value.

We performed the lease audit.  We found some problems but nothing out of the ordinary.  Then we performed a property walk, where we walked every unit.  I knew that there were some foundation issues, but the foundation had been repaired, with a lifetime transferable warranty.  This was with a foundation repair company, that I used on my single family houses.  I totally disregarded the foundation part of the evaluation, until we were entering unit #6. My wife looked at the flower beds in front of the unit and saw evidence of trenching.  We asked them, what is this?  The foundation company, had been out to do warranty work last week.  That means the foundation was still moving.  I decided that this is going to be an ongoing problem.  The operational problems were minor and could be solved but the actual structure was crumbling.  A crumbling structure is something I can’t fix, so we decided that the deal had to be let go.  We lost some option money, but that is much preferable than, buying a property that kills our total investment.

 

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