About $400 per door after expenses and rehab....Arizona

[Donald Kellogg]

View report

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

[Sam Grooms]

@Donald Kellogg, note that the 50% is a rough estimate, and should only be used for preliminary numbers. You'll want to get actual numbers from the current owner. For now, though, we can assume $1,600 in expenses. I think your rents sound reasonable. So, we have topline of $3,200, OpEx and NOI of $1,600, and debt service of $1,094 (from the report). That leaves us with cash flow of $506, or $125 per door. If you follow the @Brandon Turner school of thought, that $100 per door per month is a good target, you're good to go. This could be a deal worth pursuing. Again, you'll need to use actual dollar amounts when doing a more detailed analysis, and not just percentages. 

Going back to your current leases of $2,300, that's topline of $27,600 per year. So right off the bat, you know $31,000 of NOI isn't possible. If I use the 50% rule there, I'd get NOI of a little under $14K. At a purchase of $335,000, that's a 4% cap rate. Now we're talking about under 5 units, so cap rate doesn't mean a whole lot, but just want to clarify what's in the report.

So we know it could work as an investment, but is the purchase price OK? Instead of looking at cap rates, you'll need to take a look at the comps. Is $83,750 per door a good deal for this neighborhood? Probably. I just purchased a 98 unit for around the same price per door about 7 miles away from Sunny Slope. But you'll need to look at comps specifically for 4-plexes.