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Updated over 7 years ago,
Deal Analysis -- 8 unit South Side Chicago,
Hey all, Hoping to get some assistance on the property analysis below. I like this property itself--recently renovated, big units, good area, and the $ per unit while on the high end has some comps likewise in the area. That said, in comparing the offering current/proforma numbers to my, more conservative number crunching, it doesn't yield a big profit incentive. Looking for some feedback on whether my numbers/assumptions/planning are just plain off. Of note, the property was just finished so in process of being rented out--so the current rent is skewed downward, and pro forma are more likely reflective of year two I figure. I have maintenance low for the first two years given the just finished renovations--but increasing in later years. I also plan to invest in utility saving measures immediately so these expenses are reflective of that. I typically increase rents/expenses 2-3% year on year, and try to account for all expenses I can think of.
Lastly, I apologize for the formatting--can't seem to get the table to transfer nicely.
Ok, have at it--critical comments very welcome. Thanks. Michael.
| Their Numbers | ||||
| Asking Price | circa $800,000 | |||
| My Price | $800,000 | |||
| $ Down | $200,000 | |||
| Mortgage | $600,000 | |||
| Annual Mortgage | $36,481 | |||
| Year 1 | ||||
| Revenue | Current | ProForma | ||
| Gross Potential Rent | $71,460 | $120,000 | ||
| Vacancy Rate (%) | -$26,400 | -$6,000 | ||
| Net Rent Income | $45,060 | $114,000 | ||
| Bad Debt | $0 | $0 | ||
| RUBS | $0 | $0 | ||
| Collection/Eviction | $0 | $0 | ||
| Damages | $0 | $0 | ||
| Application Fee | $0 | $0 | ||
| Move in Fee | $0 | $0 | ||
| Late Fee | $0 | $0 | ||
| NSF Fee | $0 | $0 | ||
| Other income | $0 | $0 | ||
| Gross Income | $45,060 | $114,000 | ||
| Expenses | ||||
| Property Taxes | $3,000 | 7.42% | $12,000 | 11.12% |
| Insurance | $5,000 | 11.10% | $5,000 | 4.39% |
| Gas | $4,000 | 8.88% | $8,000 | 7.02% |
| Electric | $1,000 | 2.22% | $1,000 | 0.88% |
| Water | $2,000 | 4.44% | $3,500 | 3.07% |
| Management Fee (5%) | $3,500 | 7.93% | $6,000 | 5.26% |
| Maintenance | $5,000 | 11.10% | $5,000 | 4.39% |
| Operating Reserves | $0 | 0.00% | $0 | 0.00% |
| Pest | $0 | 0.00% | $0 | 0.00% |
| Misc | $0 | 0.00% | $0 | 0.00% |
| Advertising | $0 | 0.00% | $0 | 0.00% |
| Janitor | $0 | 0.00% | $0 | 0.00% |
| Supplies | $0 | 0.00% | $0 | 0.00% |
| Snow/landscape | $1,200 | 2.66% | $1,200 | 1.05% |
| CPA | $0 | 0.00% | $0 | 0.00% |
| Legal/Eviction | $0 | 0.00% | $0 | 0.00% |
| Trash | $1,500 | 3.33% | $1,500 | 1.32% |
| Leasing Commissions | $0 | 0.00% | $0 | 0.00% |
| Decorating/Turnover | $1,800 | 3.99% | $1,600 | 1.40% |
| Total Expenses | $28,000 | 63.% | $45,000 | 39.% |
| NOI | $16,000 | 36.% | $68,000 | 60% |
| Debt Service | $36,480 | $36,000 pro forma | ||
| DSCR | 0.46 | 1.88 | ||
| Cash Flow | -$19,800 | $32,000 pro forma | ||
| My Numbers | ||||
| Asking Price | circa $800,000 | |||
| My Price | circa $720,000 | |||
| 25% down | ||||
| $ Down | $180,000 | $180,000.00 | ||
| Mortgage | $540,000 | |||
| Monthly Mortgage | $3,127 | $37,525.51 | ||
| 5.00%, 25 yr amort | ||||
| Current | Pro Forma | |||
| Revenue | Year 1 | Year 2 | ||
| Rental Income | $96,660 | $109,800 | ||
| Vacancy Rate (8%) | -$7,733 | -$8,784 | ||
| Net Rent Income | $88,927 | $101,016 | ||
| Bad Debt (2%) | -$1,779 | -$2,020 | ||
| RUBS | $0 | $1,920 | ||
| Gross Income | $87,149 | $100,916 | ||
| Expenses | Year 1 | Year 2 | ||
| Property Taxes | $12,672 | 14.54% | $12,925 | 12.81% |
| Insurance | $5,150 | 5.91% | $5,305 | 5.26% |
| Gas | $8,240 | 9.46% | $8,487 | 8.41% |
| Electric | $1,030 | 1.18% | $999 | 0.99% |
| Water | $3,605 | 4.14% | $3,497 | 3.47% |
| Management Fee (7.0%) | $6,100 | 7.00% | $7,064 | 7.00% |
| Maintenance 5% | $4,357 | 5.00% | $5,046 | 5.00% |
| Operating Reserves | $2,400 | 2.75% | $2,400 | 2.38% |
| Pest | $320 | 0.37% | $326 | 0.32% |
| Misc | $500 | 0.57% | $510 | 0.51% |
| Advertising | $500 | 0.57% | $500 | 0.50% |
| Janitor | $2,000 | 2.29% | $2,040 | 2.02% |
| Supplies | $500 | 0.57% | $500 | 0.50% |
| Snow removal/landscape | $1,200 | 1.38% | $1,224 | 1.21% |
| CPA | $800 | 0.92% | $816 | 0.81% |
| Legal | $871 | 1.00% | $1,009 | 1.00% |
| Trash | $1,530 | 1.76% | $1,561 | 1.55% |
| Leasing Commissions | $2,000 | 2.29% | $2,000 | 1.98% |
| Decorating/Turnover | $1,632 | 1.87% | $1,665 | 1.65% |
| Total Expenses | $55,408 | 63.58% | $57,874 | 57.35% |
| NOI | $31,740 | 36.42% | $43,042 | 42.65% |
| Debt Service | $37,525.51 | $37,525.51 | ||
| DSCR | 0.85 | 1.15 | ||
| Cash Flow | -$5,785 | $5,516.41 | 2.69% | |
| CAP Rate | 4.41% | 5.98% |