Advice on turnkey 6 Unit in Allentown, PA (UPDATED)

Hi All,

Very recently, completely renovated 6 unit in the city of Allentown, PA. It's an aesthetically pleasing building from the outside and the inside has been completely renovated by a RE investor. They acquired the property in Sept 2021 for $300k and are now asking 1.1 mill after putting in "hundreds of thousands of dollars"

From the listing: "All 6 units have been FULLY updated from top to bottom with fresh paint, new flooring, new energy-efficient windows, newly tiled bathrooms, and all new kitchens. Each unit has a massive floorplan, tons of sunlight, and are all 2BR, 1BA. The building features ALL-BRICK construction, has had a total facelift including a facade, and has a very well-maintained roof. Tenants pay all utilities and include reimbursement of $40/mo per unit for water/sewer. Tenants have been there for over a year."

Here's what I came up with. Appreciate any feedback:

Each unit rented at $1500 and market median rental rates range between $1225-1550 for 1-4 BRs

Gross Income 108,000.00

Expenses 22,680.00

Exp Ratio used for Valuation 19.0%

NOI 87,480.00

Estimated Expenses* I've computed:

Property Taxes 8,421

Other Taxes 1,000

Insurance 4,000

Electric 500

Water 1,160 (1400 less 240 reimbursed by tenants)

Maintenance 2,000

Property mgt 8,640.00

Total $32,013

Estimated Expense Ratio 29.64%

*Tenants pay all utilities.

Debt service assuming: Asking price of 1.1 mill financed at 7.5% for 25 yr with 25% down = $73,160 yields nearly zero CF. Therefore, the only thing that works with hard money is $650K, assuming seller would even entertain this:

Investment Required: 182k (25% down payment + 3% closing costs)

Cash flow 32,369

assuming 60/40 investor split 10.7% COCR and 12.9% IRR in Year 1 (principle paydown in yr 1 = $6902)

Any thoughts, feedback or comments welcome Not sure the seller would agree to accepting an offer 450k under asking, but that's all that makes sense given the environment. Of course, if they don't need the Cash I could come up with an offer to get them to their asking, perhaps with a 5 or 7 year balloon.

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