Help analyzing a 5-unit Deal

[Leo Maldonado]

Hi Everyone, 

I am looking to do my first commercial deal. I currently own residential multifamily and I want to get into commercial due to the scale you can get and Control Value. 

In order for my strategy to work though, I need to be able to secure the correct first deal: Value add 5-Unit under $500k

The goal would be to force appreciation, elevate cap rate, and flip the building to another investor. Profit, 1031 exchange into a larger deal.

The reason for this price is I am shopping on what I can put down for a down-payment WITH a partner. 

With that being said, here's the deal:

Purchase Price: $475,000

Cap Rate: 8.3%

Unit Mix

2/1- $900

1/1- $900

1/1- $875

1/1- $850

1/1- $800

Total: $4325/M  $51,900/Y 

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Maintenance

Insurance: $184.39/M 

Electric: $18

Water: $50

Garbage: $160

Taxes: $464.39

Common Areas: $150

Total: $1,026.64/M  $12,319.68/Y

Total Units: 5

Total Sq Ft. : 3,000

[Henri Meli]

@Leo Maldonado I'm assuming these numbers you are sharing are the marketing version of the data (provided by seller of broker), correct?

If so, then you really need to update them. Expenses are just around 25% of income? You are being lied to. 

There are tons of other expenses you need to account for. Knowing FL properties, this is probably an old property built in the 60s or earlier. What would you do, if the HVAC goes down? What's the age of the roof? When someone moves out, how do you bring someone new in? What are the costs? I'm assuming you managing yourself?