Help evaluating 6 unit multi family deal

[Sixto Velasco]

I’m new to investing in multi-family commercial properties. I have a couple of single family réstale properties and looking to step up into MF space. Need help evaluating an opportunity to invest in 3 duplexes, 6 units total in downtown Pensacola, FL. Developer build brand new houses on same street as the duplexes mentioned below.

What do you think??

Price= $520k

NOI = $41,770

Cap Rate = 8%

Annual Rent = $55,260

Insurance = $2594

Taxes = $2607

Management Fee = $4421

Reserves = $1658

Maintenance = $2210

Duplex # 1 - 2bed/1bath - 1175sqft - Renovated

Annual Rent = $19,020

Insurance = $950

Taxes = $881

Management Fee = $1522

Reserves = $571

Maintenance = $761

NOI = $14,336

Duplex # 2 - 2bed/1bath - 1175sqft - Renovated

Annual Rent = $20,640

Insurance = $650

Taxes = $840

Management Fee = $1651

Reserves = $619

Maintenance = $826

NOI = $16,054

Duplex # 3 - 2bed/1bath - 1175sqft - New roof in 2yr

Annual Rent = $15,600

Insurance = $994

Taxes = $886

Management Fee = $1248

Reserves = $468

Maintenance = $761

NOI = $11,380

[Dylan H.]

Hey @Sixto Velasco! I think your predictions for reserves (which I'm guessing is your CapEx holdings?) is a good bit low. Also, it doesn't seem that you are accounting for vacancy, which I think an additional 8% would be reasonable for that.

I know the 1% rule is just a rule of thumb but I would say it's a pretty good guideline for properties around this price point. Currently you're sitting at about the 0.88% rule, which would mean you are probably going to negatively cashflow. I think using a 50% expense ratio is pretty reasonable, which would drop your NOI down to $27,630.

I wouldn't personally be a huge fan of this looking at your numbers, unless this is a value add with potential for an increase in your income. I'm currently living in Pensacola and would love to check out the property with you if you're looking at it soon!