First Multi family deal

First Multi family deal

Investor · Fayetteville, NC · Member since 2016 · 74 posts · 26 votes

Looking for a little help. 

I’m making the leap from flips into multi family complexes. Found 12 units in a C class neighborhood for 180,000 that we’re severely damaged from Hurricane Matthew and are being sold short as the owner can not repair. All units are vacant and need to be remodeled to be rent ready. 

Here's the basic numbers: 
Purchase price: 180,000
Rehab: 200,000
Retail Value: 475,000

Here is pro forma created by myself: 

I have a couple of questions. 
1. Are my numbers reasonable on expenses and occupancy rates? 
2. I have a total of around $100,000 to put into the deal but need $400,000. I am meeting with a local bank to discuss options but any other ideas on where to come up with capital and how to fund this deal? 
3. If I fund this deal with friends and family what does the compensation model look like for them? I've seen the model of a 6% preferred rate of return but then how do you rate the return is it on total cash flow or on their investment? Also how to you slice them into the exit strategy? 

Preferred exit strategy is the remodel, season and refinance my cash out of the deal to rinse and repeat. 

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  • Rental Property Investor · Northville, MI · Member since 2015 · 179 posts · 92 votes
    8y

    @Brandon Purdeu Congrats. I would first ask the current owner if he/she had insurance on the property when it got damaged. If yes, ask him/her if they got an insurance check for the damages. If they did ask them where are the funds are or what were the funds used for. If they never filed a claim get an agreement with the owner and then Google search "Public adjuster". Now PA will work for you to get more money out of the insurance company and is like a lawyer for you. And they don;t get paid until you do.  
    Your expenses should be 50% of your income. Here are some rules of thumb:

    Real Estate Taxes .01 of Sales Price
    Insurance 0.007 of sales price
    Water and Sewer $400/unit
    Electric $100/unit for common areas. If owner pays, use $100/unit/month.
    Gas If owner pays, $100/unit/month
    Trash Removal $200 per unit
    Management Fees 5-10% of Gross Income
    Legal Fees $150 per unit
    Contract Services $324 per unit per year
    Repairs and Maintenance 10% of Gross Income
    General/Admin Varies
    Payroll/Salaries $1,240 per unit

    Replacement Reserves $150 per unit
    Marketing Cost $157 per unit

    Hope that helps. Good luck

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