Help Analyze First Deal-4plex

[Craig Parnacott]

Please help with analyzing my first possible deal. Please take a look and let me know what you think, my goal would be to purchase somewhat lower than the ask but I wanted worst case scenario so I used the ask price for the analysis. Thanks for the help and let me know if I am missing any necessary information.

4-unit building all 1 bed 1 bath and all currently rented.

Ask Price: $60K

Downpayment: $15K

Finance: $45k for a term of 30yr

Current rent is $450 per unit (all units currently rented: $1800/month gross)

Owner paid utilities per month: $282.00 (gas, water/sewer, trash, common area electric.)

Taxes: $1635/yearly

Insurance: $706/yearly

Approximate Mortgage payment: $398 includes taxes and insurance

Possible property management: $300/month for the whole building

[Troy Fisher]

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Vacancy: 2,160 (turnover is faster for quads, so you probably want to estimate 10%)

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Vacancy rate is one of the things that I think more people underestimate on 4plexes and at 10% you are saying that your units are going to be out of commission for 4.8 months. That's one month for turnover per unit. Depending upon your area that could change dramatically. I personally like to go with something more realistic 12.5% for my market. (5 weeks/per unit)

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Management: 2160 (10%)

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Ready for another Dirty Little 4plex secret? Property Managers really don't enjoy managing these properties. Often times you will find that the properties rent much lower than other SFH or MFH in the area and they may enforce a 10% or a Minimum Amt. I've seen it between $60-$80/unit so in your case at $60 you'd be looking at 13.33%

So there I've gone and added 5.83% to your costs projections over the 50% rule. With a 4Plex

[quote]

Leasing: 1237

Management companies typically charge 1/2 month rent for leasing, on top of the usual 10% for ongoing management. For a quad, definitely figure two vacancies per year, or three to be more conservative.

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I love leasing costs! Hahaha! Right. Another secret Property Manager Tool to the uninitiated. Here in Vegas they run a full month down to half a month, and our turn over is much higher!

Utility Cost paid by the owner?!?! Add another 10% to your costs. $282 sure sounds like a VERY low amount for utilities for 4 units/mo. That's what $70/month for water and Electricity per unit? I wouldn't believe that one.

@Harry M. has given some great advice, and his breakdown takes you to less than $100/door and in the costs that I experience, and increased utility costs to realistic amounts, and you are probably closer to $80/door a month.

COC might look sweet 22.5% but one bad repair (broken AC! Roof repair and your out profit for over a year!