Newbie requesting assistance evaluating a multi-family complex

[David Cable]

I am reviewing a multi-family complex for my first investment purchase and would greatly appreciate some experienced insight into my evaluation of the property....  Info provided by seller:

Requested Purchase Price - $369,000     Six Units - $750/mo each     Trash - $135/mo     

Water & Sewage - $500/mo     Taxes - $3461/yr     Insurance - $3500/yr         

Maintenance - Approx. $1200/yr     Roof - New in last 6 mo     HVAC - Window A/C units   

Windows - Replaced in 2010     Kitchen/Baths - Updated 2011     

Water Heaters - 4x 4 yrs old/2x 2yrs old     Electrical - Updated in last 6 mo     

Laundry Room - Common space currently used for storage, has washer/dryer hookups

Bank Loan Terms: Interest Rate - 6%     Amortization - 20 yrs     Downpayment - 20%

Given the purchase price of $369,000 w/ 20% down ($73,800) my loan amount would be $295,200. With an amortization of 20 yrs at 6%, I calculate monthly P&I to be $2,114. Adding the monthly expenses of trash, water/sewer, taxes, insurance, 5% vacancy rate ($225), 5% maintenance in lieu of their given costs ($225), 10% CapEx ($450), 10% Property Management Fee ($450) my monthly variable/fixed expense are $2,770. Thus:

Monthly Expenses: $4,844     Montlhy Income: $4,500     Montlhy Cashflow: -$384

1. Am I setting my expense percentages (vacancy, maintenance, CapEx, Management) too high given that capital expenditures seem to be minimized due to the recent updates and maintenance costs are reported lower?

2.  What other formulas/metrics should I be utilizing to evaluate the property?

3.  Good Buy or Bad Buy?

Any feedback within this thread will be tremendously helpful to all the newbie investors getting their feet wet.

Thank you 

[Chris Martin]

Welcome to BP.

Have you talked to a multifamily loan broker? Why aren't you looking at (FNMA) multifamily for a loan? I've not looked into MF loans as small as you are considering, but FNMA has a that, I think, will do a 5+ with no minimum limit.

I didn't look at the numbers, but $369K/6 ~= $60K, at $750/mo, 50% rule puts you at 4500 which should be ok at low rates for $60K/unit.