Is this a good deal ?

Question

Found a 12 units listed for $595,000

Rent collected $79,920/yr

Expenses :

Tax - $ 3299

Water : $ 4736/yr

Waste : $ 1320/yr

Electric : $ 12,240/yr

Total Expense : $ 21,595

I'm new to this and trying to grasp as much info as possible to get into Multifamily RE investing.

Looks like all water heaters were replaced less than 4 yrs ago. Roof replaced in less than 3 yrs ago. I'll put 20% down. Haven't looked at loan yet. Not sure what APR I'll get. I have excellent credit and 6 figure job.

Thank you

Manmath D. · Answer

Tank you all for ur replies. I'll try to gather more info on this and rerun the numbers. And also spend more time reading on multifamily investments.

Polly Wu · Answer

Expense is missing Vacancy 10%, Property Management 10%, Insurance, Repair & Maintenance,  Landscaping, CapEx 5-8%.  What's the estimated rehab cost, current occupancy? Average is only $555/unit/month. Assuming with a 5% 30yrs fixed loan,  the COC will be under 2%.

Sorry but not a good deal.

I'd suggest you learn how to analysis first before looking at deals on MLS.  There are a lot of podcasts and webinar you can listen and watch. That will be a great place to start.

Jonathan Twombly · Answer

@Doug Woodville Yeah, that too.  But it said "rent collected" so that might already be net of vacancy.  Either way, it's important for @Manmath D. to know what's in that number.

Doug Woodville · Answer

What @Jonathan Twombly said. Also I forgot to add that you need to account for vacancy as well.

Jonathan Twombly · Answer

@Manmath D.  You also need to look into whether the taxes will change on sale.  Some places assess on a schedule and other assess on a sale.  Depending on how the taxes are calculated, they could really jump, so this is something that you need to understand.

There is also no repairs and maintenance expense.

Doug Woodville · Answer

What about insurance and property manager fees? That will be another 10%+ right there. I'd do your best to at least make an educated guess on the mortgage. There are plenty of websites and free excel sheets to where you can be conservative and try to predict the mortgage cost. I'm guessing with all those things considered you'll be somewhere around $60k or so total expenses. Try to work out the remaining numbers and post up afterwards.

Try searching the BP website for rental "calculator" spreadsheets too! There are a couple good ones.

Is this a good deal ?

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