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Updated almost 8 years ago,
- Rental Property Investor
- Washington Township, NJ
- 976
- Votes |
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8 Unit Analysis - Appreciate all thoughts and opinions
Hey BP - For the past few week I've been reading through the Multi-Family forum trying to pick up bits and pieces of knowledge before making this post but figured I'd just dive in and take advantage of all the great wisdom and advice available on BP. There is an 8 Unit building that I have been looking at and am very interested in because I think it has some really solid potential. Here is the data from the proforma
| Rental Income | $ 62,280.00 |
| Other | $ 1,612.00 |
| Vacancy Allowance 5% | $ (3,114.00) |
| Gross Income | $ 60,778.00 |
| Water/Sewer | $ 5,370.00 |
| Taxes | $ 4,877.00 |
| Management 5% | $ 3,114.00 |
| Repairs/Maintenance 5% | $ 3,114.00 |
| Insurance | $ 1,988.00 |
| Gas/Electric | $ 782.00 |
| Landscaping/Snow Removal | $ 250.00 |
| Gross Expenses | $ 19,495.00 |
| Net Operating Income | $ 41,283.00 |
| Asking Price | $ 425,000.00 |
| Cap Rate | 9.7% |
Now when I do my numbers I come out with some very different information. Here is what I've got put together and let me know how I'm looking at this wrong or differently than how the seller and listing broker are looking at things.
| Unit | Beds | Current | Future |
| 1 | 3 | $ 715.00 | $ 900.00 |
| 2 | 2 | $ 695.00 | $ 800.00 |
| 3 | 1 | $ 545.00 | $ 650.00 |
| 4 | 1 | $ 595.00 | $ 650.00 |
| 5 | 2 | $ 695.00 | $ 800.00 |
| 6 | 2 | $ 595.00 | $ 800.00 |
| 7 | 3 | $ 625.00 | $ 900.00 |
| 8 | 3 | $ 725.00 | $ 900.00 |
| Rent Roll | - | $ 62,280.00 | $ 76,800.00 |
| Property Tax | - | $ 5,100.11 | $ 5,100.11 |
| Water | - | $ 5,400.00 | $ 5,400.00 |
| Management 9% | - | $ 5,605.20 | $ 6,912.00 |
| Repairs 9% | - | $ 5,605.20 | $ 6,912.00 |
| CapEx 9% | - | $ 5,605.20 | $ 6,912.00 |
| Insurance | - | $ 2,000.00 | $ 2,000.00 |
| Other | - | $ 1,000.00 | $ 1,000.00 |
| Vacancy 8% | - | $ 4,982.40 | $ 6,144.00 |
| Total Expenses | - | $ 35,298.11 | $ 40,380.11 |
| NOI | - | $ 26,981.90 | $ 36,419.90 |
| 10% Cap Rate Value | - | $ 269,818.95 | $ 364,198.95 |
| Deferred Maintenance | - | $ 50,000.00 | |
| Offer / Improved Price | - | $ 219,818.95 | $ 364,198.95 |
What is it that I'm missing or doing wrong that my valuation of where this deal should be is almost a full $200k lower than what the listing broker is asking? Obviously I see the differences in them only using 5% for vacancies, management, and repairs and that they have no CapEx budget. These things obviously add up to be pretty substantial.
The current owner of the property purchased the home for $250,000 back in 2005, so I feel like since their rents haven't changed much since then as they are way below market...the asking price should be not much different than what they originally purchased it for.
Greatly appreciate all of the input and advice you can offer!