Multi-Tenant Family Cash-Flow

[Marty Summers]

Alright folks... can you give me an idea if I could put down 25% (300k) onto a 1.24 million dollar multi-tentant family property.  How much should I expect it to cash-flow per month?  Live in Southern Indiana market.  Thanks!

[Nichole Stohler]

@Marty Summers, great question.  Tough to answer because there are so many variables.... what are the details on the property?    For example, has it been re-positioned by someone else? Or what value-add opportunities do you see?

[Marty Summers]

@Nichole Stohler   I wanted to get a general idea.  Is the rule 1% or more on the total value of the property like rental homes?  As in 1.2 million, expect 12,000 per month at a minimum in revenue.

what do you mean be re-positioned?

thank you

[Nichole Stohler]

Got it... ok, we look at net profit which is almost never what is on the pro-forma.   Because we've had tough times before (BP post here - http://bit.ly/2s0SQil), we estimate $100 per unit per month in profit as a conservative number.  This doesn't mean you cannot do better,  it's just a rough number because things can (and do) go wrong and if you have certain expectations and exceed them, you'll be more encouraged to keep going.   

A re-positioned property is one that an owner has already bought at a great price, fixed up, rented out and is now selling with limited new value-add opportunities for the new owner.    There's less opportunity to make money because you are paying a premium with little upside.     For the property you are looking at, what does the seller/agent/description say?  

[Account Closed]

@Marty Summers This is a very interesting topic, thanks for posting it. By the way, I lived in Newburgh when I was a kid. On Frame Road acroos the street from St. John's Catholic Church. Small world.

[Thomas S.]

Take your all in purchase price and divide it by the number of units, adjusting for various size of units and then determine a appropriate rental to produce your cash flow based on unit cost. The greater the number of units the more you should be getting per door in positive cash flow based on having payed less per unit.

$100/door positive cash flow may be ok in a 4 unit but you would expect greater as the number of units increases.  

It is not simple math as the larger the investment the more working parts need to be considered.