Am I getting my small MF costs right?

[Kurt Hines]

Hi All. I'm looking at a couple multifamily properties in Northern Michigan (local to me). They don't seem like good buys, but I'm concerned that I may just have my expense numbers wrong. Below is one of them. Am I missing anything, or including something I shouldn't? Or including things in NOI that I shouldn't? I have one rental, but this would be my first multifamily

I'm doing a lot of numbers on these as practice, and plan on touring it next week. Even if nothing comes of it, it is a good learning experience!

6 total units (3 duplexes, Four 2-bedrooms and Two 1-bedrooms)

Asking Price 196k (Has been on the market for 14 months. I think they got the price by adding the potential retail price of each duplex, not calculating NOI against CAP Rates for the area (8-9%))

Current Gross Rents: $2,525, I think this could be stabilized to about $3,100.

Thanks!

Monthly Expenses
Cost Item	Cost	Estimate or Actual?
Included in NOI
Prop Taxes	$500	Actual, seems high, maybe could be lowered
Insurance	$238	Actual, number from Ins. Agent for Replacement cost, could insure at ACV
Water/Sewer	$170	Actual, a couple residents have Washers, would charge them for this.
Trash	$19	Actual
Electric	$0	Estimate, Tenants pay
Gas (for Heat)	$0	Estimate, Tenants pay
Landscape / Snow	$125	Estimate, large shared parking lot, lots of grass, lots of snow
Accounting / Tax	$50	Estimate
Legal	$30	Estimate
Vacancy/Loss 10%	$253	Estimate, number bank appraiser uses
Repairs & Maintenance 5%	$126	Estimate, appears to be very little deferred maintence, would be confirmed
Management 10%	$253	Estimate, would self manage, but to put against NOI
Total NOI Costs	$1,763
................................................
Not included in NOI
Financing	$606	Assuming an offer of 100k, 75% bank financing, 20% seller financing
CAPEX	$125	Estimate at $250/door/year, would be confirmed
Total Extra Costs	$731
................................................
Total Monthly Expenses	$2,495

[John Leavelle]

Howdy @Kurt Hines

Looks like you covered everything . I would increase the CapEx amount to 10% until you can verify the current condition of all major components and appliances. Then adjust from there. Is each Duplex on its own lot or all on one lot? If separate, that might be why they used Comps verses Cap Rate. With a 9 Cap Rate and using your NOI makes it look like they under priced by roughly $50K. What is driving your $100K offer price? Is there a lot of Rehab work needed?