What is your process for analyzing a medium multi-family?

[Michael Wentzel]

Hey friends,

I own 6 single-family properties and 2 small multi-family properties (1-4 units). I'm starting to look at medium-sized multi-family properties. There are are a couple of 8-unit buildings and one 60-unit apartment complex. What is your process for analyzing medium-sized multi-family properties? How does it differ from single-family?

I know the lending is different when I go over 4 units. I would guess my percentages that I use for expenses would be different as well. I am probably in C-class properties. I currently run my numbers at 11% for property management, 10% for maintenance, 5% for cap ex and 9% for vacancy. Should these be higher and lower for medium-sized multi-families?

I would appreciate input from those who have graduated to larger properties.

Mike

[Joel Owens]

Down and dirty take expected gross rents after market rents are verified minus any concessions and take 50% off.

If seller pays water take 60% off.

Count remaining as NOI to figure out cap rate. Now sellers will say your costs are nuts and to go by their 35 to 40% expense numbers. You could do that but a few things go wrong and boom your cash flow projections you bought on are down the toilet. Be CONSERVATIVE when buying and if it goes better than expected it's gravy but if it's as bad as you thought and planned for you are still hitting your numbers.