Analysis of 6 plex - Please help

[Bryan H.]

Please take a look at the attached file and let me know if my analysis is correct .

This is a 6 unit property that I am looking to purchase. I will be speaking with a lender soon and want to make sure my ducks are in a row before I do.

Do the numbers make sense?

Are my assumptions accurate?

Let me know your thoughts

Thanks in advance

[Ben Leybovich]

Originally posted by @Bryan H.:

Originally posted by @Ben Leybovich:

Brian,

Loan origination costs on commercial paper should be ok at 1%. 2% acquisition costs on a 6-plex are likely too high - all you're buying is an appraisal and title fees/policy. There likely won't be any costly surveys. Each bank is different - just ask.

I am more concerned with your cash flows. Looks like you're escalating everything by 2%, which is fine. But, economic occupancy of 93% in a building full of $675 tenants is a pipe-dream. This is why I think at $275k you'd be overpaying by a good margin...

I don't like the spreadsheet particularly, but it does prove the IRR and provide for NPV. Have you done those analysis? I bet not, since you don't have the exit cash flow in the page I am looking at :)

Run this with 86%- 88% economic occupancy and see what the numbers tell you...:) 

I had calculated other metrics, but most people won't take the time to review my first upload. I have uploaded more metrics. Appreciate your feedback!

The area I am looking in is HOT, been that way for years now. Lots of growth, new builds, tear down & rebuilds going on. People want to live there. I will budget for 14% vacancy, but I may do better. 

 You likely will do better, but you shouldn't budget on that :) Besides, 5% physical vacancy + some very minimal bad debt, concessions, and LTL, will take you to 9%-10% whether you like it or not. So, hopefully you do better, but...