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Updated over 9 years ago on . Most recent reply
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Help Analyzing a 4plex
I am looking to buy this 4 plex. Am i missing anything with my numbers? How does everyone feel about the offer price? There are no comps in the area for a 4plex.
Asking price: $159,900
Offer price:$130,000 w/ seller holding note for 20%
Gross Rent: $2200
Cap X: 220
Maintenance: 220
Vacancy: 220
PM: 220
Tax and Ins: 150
Debt Service: about $700/mo based on 5% interest on $130,000
My intent would be to offer $130,000 and have seller hold a loan for 20% of that. I would get 80% loan(from someplace yet to be determined.)
Cashflow: $470
The 4 units are rented. I have no due diligence yet on any rehab costs. I know that it is at least rentable since all 4 units are rented. The outside seems fine, with no noticable repairs.
Any advice is appreciated.
Most Popular Reply
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Lots of thoughts on this (and I don't mean to offend, just offer my insight):
Where is the "other" 80% coming from? You have no skin in the game. You are borrowing money from the seller to show the bank you have a down payment, and you are borrowing money from the bank to pay the seller. This is not conventional nor creative.
Your property taxes and insurance allocation looks underestimated. I would use your local tax estimator or tax records to review the actual tax figure/ year AND call your insurance company for an actual quote on insurance for the year.
I plugged all your given numbers (though they should be verified) into the BP buy and hold calculator, and that 4plex property will cash flow $94.57/ month divided by 4: so each unit should yield you $23.64/ month in cash flow.
I assumed you'd be paying back the seller carried 20% ($26,000) at 5% for 5 years with a payment of $253/ month.
Have you looked into a FHA loan on primary occupancy dwelling (duplex, triplex, quadplex). But, don't forget about your reserves, repairs initially to get rent ready the other units.
My interpretation is this deal is a poor choice unless there are other variables not mentioned.