First Multifamily Property. Decent deal or no?
I have 2 single family rentals but have never owned multifamily. It is 2 buildings, 16 units total, 12 each 2 bed/1 baths &amp; 4 each 3 bed/1.5 baths in low income/lcol area.

Purchase Price: $220k
Rehab costs:$110k
Owner pays water, garbage, outside lights, insurance, and taxes totaling approx $1600 per month. 
Rent roll: Only 3 units rented, totaling $1300/month. 


Property manager in the area said rent would be approx. $475 for the 2 bedrooms and $550-600 for the 3 bedrooms and they charge 10% management fees.
Current owner has not invested any money into the units, hence why only 3 are rented. He is definitely losing money each month on it. 8 units could be renovated quickly, within a few weeks, and put on the market. The other 8 would take a little longer. 

Looking at using one of the single family rentals as collateral for the full $330k. The bank is offering 4-4.5% on a 20 year loan, with 5 year balloon. 

I am nervous about doing it now since no one knows when this crisis is going to settle down. This is my first time with something like this, commercial loan and multifamily property, so any constructive advice is greatly appreciated. If you want to troll then find a different post please. I don't have time for it right now, although, I technically do because of this whole self quarantine deal. Thanks!
[{"id": "fl3f0mt", "text": "Is it an area that is already subject to rental/tenant eviction restrictions or could be in the future? What lease percentage do you need to keep the property running without a profit? I would hold off, the rental market could get really fucky in the next few months, introduces a ton of risk for places that have low cap rates, let alone mid to high.", "replies": [{"id": "fl3x0ej", "text": "I wouldn't be evicting the current tenants. After improvements are made, their leases are up, and it is a little more stable, I will probably be raising their rent some. One of the tenants has been in place for 6 years and basically plans to stay there until they expire. If I get 8 units rented then I will be cash flow even. Thanks for the feedback.", "replies": [], "depth": 2}], "depth": 1}, {"id": "fl3pebv", "text": "Risky\n\nWould your overall real estate portfolio be cash flow positive? This property will be burning money until you get the rehab wrapped up and you lease out the additional units. So if I was in your shoes I would want my SFR\u2019s to be able cover the $330k loan\u2019s mortgage payments as well as the ~$-300/month of operations from the MF. I also wouldn\u2019t want my SFR tenants to be coming up on a renewal in the next couple of months, you\u2019ll have enough trouble leasing up the MF. \n\nAlso keep in mind it\u2019s going to be tough to find tenants right now. I doubt many people will be moving to the area because they got a job nearby. Not a ton of employers are hiring right now. \n\nIf you have a large net worth / liquidity and a stable high paying job that makes it easier. If you do decide to buy I would play hardball with the seller. You hold all the cards here. He\u2019s got a distressed property, he doesn\u2019t have the $ to fix it up, he\u2019s burning cash, and this is a really tough time to lease. By taking it off the seller\u2019s hands you are doing them a favor! So make sure you get the best value you can. $16k/unit is cheap. But you may be able to get it cheaper.", "replies": [{"id": "fl3y5yz", "text": "The 3 tenants in the mf have leases of 6, 8, and 9 months remaining. One tenant is section 8, and I think another has a pension/fixed income. Overall, I will be cash flow negative on all the rentals $1100 mo until I get them rented. I plan to fix one and get it available then rented, as I move to the next, and continue the process. For this property to carry its weight I need 8 units rented.\n\nI have a decent paying job and it is steady, even during this time so I can cover the loss for a few months. I went into contract at $220k a few weeks ago, before crap hit the fan. I'm just waiting on the financing piece now. I do have some contingencies on my side if I need to exit. Thanks for the advice!", "replies": [], "depth": 2}], "depth": 1}, {"id": "fl3pr1q", "text": "City?  Price per unit is inline with what a vacant building would cost.   \n\nI think the question is how at risk is your tenant base once your units are rent ready.   I would consider making those units section 8 vouchers to guarantee the income.", "replies": [{"id": "fl3ycfw", "text": "One tenant currently there is on section 8 so I know I could get more. I have family who have rentals in the area and they say there is definitely a need. They have to turn people away because they don't have available rentals often. Thanks!", "replies": [], "depth": 2}], "depth": 1}, {"id": "fl3tv0y", "text": "600 dollars for a 3bed? 4% today? you need a different bank, and nope, I won't touch that building. Renovation means 110k turns into 220k as kick as you start to work inside the building and need to update stuff to be in compliance. Where you can rent a 3b for 600?", "replies": [{"id": "fl3yvoh", "text": "What is a good commercial property interest rate currently? You can find a 3 bedroom in areas across the US that do not have good, high paying job opportunities. I think the $110k is pretty spot on with the renovations I'm doing. Thanks for your take on it.", "replies": [], "depth": 2}], "depth": 1}, {"id": "fl44b7k", "text": "Rents are too low ....... whatever numbers you're working out on paper ..... will NOT be what you experience in real life.\n\nif you really feel like you need to do this deal ..... Then in today's environment right now, with Corona, the low occupancy, the massive rehab number, and the super low rents .... you should be around $7500-8500/unit.  And then plan on flipping out of this pig before you get on that never ending treadmill of chasing rents and going in reverse.", "replies": [], "depth": 1}, {"id": "fl45cdl", "text": "Renovations ALWAYS cost more than you think. I am betting you find mold, foundation issues, and who knows what else once you start tearing it apart. I used to work for a mega developer that did a few renovations, and there were always misses in the budgets before getting GMP from a general contractor. Sometimes the misses were measured in the tens of millions like a project we had in San Fran needed some foundation shoring that was missed until GMP.\n\nThe management fee seems way high, but probably due to the small property size.\n\nThings you should Really consider:\n\n1) what is the market in that area: vacancy rates, rental rates, landlord/tenant laws, jobless potential, proximity to services like grocery stores. What is the neighborhood like?\n\n2) A very rough quote from a GC.\n\n3) a detailed proforma to let you know what your returns could be on this project if all goes perfectly, but I would model a high vacancy %, below market rental rates, very low revenue growth rate,and make sure your modeling the drag your renovations will have.\n\n4) You make money on the buy. It seems to me you are over paying for this property. What contingencies did you put into the contract that give you ours or options to renegotiate price?\n5) know why, exactly, this product has only 3 units rented.", "replies": [{"id": "fl4hyaa", "text": "These are great questions. \n1) I have one rental in this town and it stays rented. Some family have rentals and they don't have issues keeping occupants as well. I have used property managers with the two that I have had and haven't had too many issues with tenants. They typically do a good job with prescreening but I've had a few move out early and leave the place in a mess.  I've just gotten it fixed/cleaned and put back on the market. This complex is 3/4 of a mile from a large grocery store and 1.5 miles to the town square. It has a population of 15-18k. The next largest city is 30 minutes away, 100k people. There are a lot of people who rent for various reasons: lack of down payment, lack of knowledge of how home ownership works/commitment issues, transient. A lot of owners also do not keep the properties in good shape so decent, low cost rentalss are sought after. \n\n2) The rough estimate I got from the person that has rehabbed my other two rentals was $94k and the purchase price is $220k. The bank is doing an appraisal to see current value and projected renovation value. \n\n3) I'm currently in the military and plan to retire in 5 years to start a different career. I want to buy these, hold long-term, and rent them as a steady income stream. I basically just want it to pay for itself and not be a huge pain in the backside. I know I will be losing money on it for the first 2-3 months until I get them rented. I've figured that I need 8 of the 16 rented to be breaking even on it so if 12-14 are rented then they will go toward the emergency fund and then to the principle. I'm not some big-time investor, just a small fish in a small pond.\n\n4) I don't have a contingency to negotiate price exactly. I have one that is contingent on financing and appraisal. \n\n5) I spoke with the property management company that currently manages them and asked them straight forward questions about it. I asked them if it was their fault that only 3 out of 16 are currently rented or what the deal is? They told me that they have talked to the current owner numerous times about putting a little money into them to get them in shape to be rented but he will not do it. 5 of them just need paint, flooring, and a few appliances. 1 has been gutted to the studs so it will be the most expensive to renovate. The others are somewhere in between the two extremes. 5 could be rented out within a few weeks to add to the 3 currently rented. \n\nThanks for the questions!", "replies": [{"id": "fl4uyqv", "text": "How is the occupancy in the other units in this complex?\n\nAnd you should probably do a little more due diligence on the area. Unless this is where you live and know the market. You should know multi family occupancy numbers, turn over rate, and several other measures. Multifam, especially lower income multifam, is a VERY different beast from a single family property.\n\nAnd yes, those are certainly resins why people rent, but you should have a little better understanding of who those renters are and if they are likely to fill your property.\n\nComparable units in the area. Call and say your a renter and wanting to move in, ask about concessions, contract length, what amenities are included, which utilities, etc.\n\nI think this could be a great deal and make you some great returns, eventually. But if you go in half-cocked, you might get rocked. I want you to be successful!\n\nJust google for a colliers repot in the area, or ask your broker. They may be a local brokerage that tracks data that you can pay $500 for a copy.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}]