[Calc Review] Help me analyze this deal

[Sara Muir]

I am looking at investing in my first multi-family property. I have a few questions, where can I find an accurate Cap Rate for any given area? Also, utilizing Rentometer, the current rent fees are low compared to the market. How do you go about increasing the rent with current tenants and do you risk vacancies in doing that? The only way this deal would make sense for me is if I could acquire the property below MLS asking price and increasing rents. Thanks in advanced!

View report

*This link comes directly from our calculators, based on information input by the member who posted.

[Charles Soper]

The quickest way to cap rates is to find a commercial broker familiar with the area, specifically multifamily or mixed use if you can.

A few things:

- your closing costs seem a little high, is that part of the contract agreement or just a guess?  Usually as the buyer you’ll pay inspection, appraisal, and sometimes title but it shouldn’t anywhere near that.

- if you are below market on rents you’ve got a choice to make.  Raise it slowly and hope to keep your tenants or all at once and risk a higher vacancy(account for this scenario in your modeling), ideally they are already month to month and you can do just about anything.  If you were planning on making improvements then it’s easier to justify the rent increase.

- looks like a pretty steep water bill, can you bill that back to the tenants?  What share of that bill is the salon?

Buy right, reduce expenses, increase revenue and you’ll be fine.  This looks like a pretty good deal and even better post acquisition.  Good luck