Seeking Feedback on Multi-Family Deal Underwriting

[Michael Belz]

Hi Bigger Pocket community ,

I'm seeking feedback on a 6-family property I've underwritten in New York . The purchase price is $1.45M, with a current rent roll of $13K per month (market rent is about $16K). The NOI is $118K without a mortgage. I'm using funds from a 1031 exchange for the deposit.

Can anyone provide insights or guide me on how to refine my underwriting or ask the right questions to ensure my numbers are accurate and this is a solid deal?

Thank you!

[Greg Scott]

BEWARE

It is nearly impossible for NOI to be $118K with rents of $13K per month. That would mean you only have $38K of operating expenses each year, a 24% expense ratio. Most likely, the owner is doing all the work for free. If you had to pay someone to do that same work, the expenses would be, should be much higher.

FWIW, debt service should be below NOI. NOI will not be affected by whether or not you have a mortgage.

I'd urge you to reconsider this deal.