Would you do this deal?

[Tommy Spijkers]

Hi All,

I'm trying to learn more about what deals are good and not so good deals for Multi Family. I would love to hear what investors more experience think of this potential deal.

It's a multi family in a low B area, 11 total units comprised of two 2-bedroom apartments. Nine 1-bedroom apartments, a laundry facility, and a storage room. Currently at 100% rented. According to the listing rents are currently below market because of long-term tenancies, and currently there is no water bill-back. It has the following numbers:

About half the tenants are long term tenants:

Would you be interested in this deal, what would you offer and what would be your max price?

[Curtis Rouse Jr]

Hey @Tommy Spijkers, I agree with the others as I invest in MFR's and analyze deals through a financial model I built and I do see quite a few factors that need to be included in your analysis.

First before I go into what else you need to include, you need to ignore all these Cap Rates and start looking at your Cash flow after your operations and financing because they will inevitably determine a good deal from a bad. For me personally, if a deal doesn't return at least a 10% cash on cash return, then I don't even waste my time. You need to run the worst case analysis as if rents will never increase and you will not manage the property better than the current owner.

So in regards to your breakout, I don't see you accounting for vacancy, property management (regardless if you self manage or not) and Capex (don't know if you included this in repairs but doesn't look like it because that's really low depending on the age and current updates to the property). You also need to include in this template the breakout of your financing and more importantly looking at the exit if you are going to sell or refinance out down the road.

Long story short, you need to figure out how much you are going to need to put in this property out of pocket and how fast the property will return that money back to you (velocity of money) running a worse case scenario and accounting for every expense possible.

All of my properties are located down in Macon Ga, but I look at properties all over the US ranging from 16  units on up to find the best markets that yield the highest returns. If you need help feel free to message me and I could quickly put an analysis together for you through my model. Best of luck!