Newbie multiplex investor

[Joe Liu]

Hi guys, have done other forms of investing with wholesaling, flipping, etc. but I've finally hit that maturity and bank flow of being able to do some buy and hold. I kind of peaked around this section of the forums but I'm not entirely sure where might be the best place to start, what cap rates I should be looking for, how the 50% rule works, rent multiplier, etc. Any links to prior topics with this information would be greatly appreciated.

A current deal that I am looking at is as follows -

List Price: $275,000
3 units, average rent is $625 on month to month.
There are no pictures of the inside so I don't know how much the rehab is going to be. The rent on each unit could be $100-150 more since its in a great area, its near my house which is what is attracting me to it and the apartments with pools go for around $950 (same size) and other dumps go for as low as $750, so thats why I think I can get another $100 easily.

Property Tax/Yr: $4,356.81
Actual Gross Income: $22,500 ($1875 mo)

I would put down 20% @ 4% / 30 yr fix

Loan - $1050 mo
ptax - $363
insur - $100
oper expen - $300?
----------------
$1813 a mo

Not sure what my operating expenses are or a safe way to figure that out. I know this deal only works if I take that monthly of $1875 and tack on the $100 more I think i can get per unit, so $2175 so I would still cash flow $360~. None of this takes into account any rehab costs though. I'd have to get inside and see.

Am I way off on that?

Thanks for those of you who took the time to read all that!

Joe

[Joel Owens]

Steps

1. Verify rent is 625 a month and that no rent credits or waiver of security deposits exist. That will bring the inflated number down.

2. Take gross expected rents. be conservative let's say 600 a month.

600 X 3 = 1,800 M X 12 = 21,600 gross expected income.

If landlord does not pay utilities go 50% costs 21,600 / 2 = 10,800 NOI.

At a 10 cap before any immediate capex you are at 108,000 offer price.

If landlord pays utility go 60% costs. 21,600 X .40 =8,640

10 cap 86,400 sales price

This deal seems WAY overpriced to even be a possibility unless the market rents are 800 or 900 for market and the place has tenants that have been there forever and the rent were not raised. Even then you will have major repairs to re-rent and get the rent upped to market which will affect offer price.