Evaluating a multi family in Tennessee

[Tom Saysithideth]

Hello BP Family,

I am looking for help evaluating a multi family in Tennessee. Here are some numbers In estimated based on current information gathered.

Property price: $300000

Total gross monthly rent: $3400

Annual property tax: $800

Home Insurance: $1200

Vacancy: 5%

Repairs: 5%

CapEx: 5%

Property Mgt: 10%

Mortgage: $1514

Down payment: 25%

Concerns:

- this property sold for a fraction of the current price 4 years ago, the jump in price is worrisome

- the gross rent for the property almost hit the 3% rule 4 years ago, which might indicate a rough area

- what are some tried and true methods to run comps for multi family units?

Summary: the primary goal is cash flow on this unit, but the exponential growth in price is unsettling and the rate of growth does not consistent with past growth 3 years and older.

Any words of advice are appreciated.

Thank you,

Tom

[Daniel Jensen]

@Tom Saysithideth what's the age of the property? I generally like to run at least 7-9% for both capex and maintenance when I am doing a proforma. Although, if the building is newly rehabbed or newer that may not be necessary. At the very least you could drop your capex reserves potentially.

I have also seen a large jump in vacancy between units for less than $1000 vs over $1000, it may be tied more to my local market, but any property manager should be able to provide you average vacancy rates they have been seeing for the last year (or even better going back several years) for other quadplexes they're managing.

As for appraisals, I look for other units that have sold in the area with Zillow or ask your realtor, although not all areas have lot of quadplexes which can seriously affect your appraisal coming back lower and depending on your lending situation impact you there