Smart Buy? First Multi-Family...

[Frank Scala]

Hey fellow Renters,

Is this a good multi-family or am I missing something? I'm going to check out a few properties in PA this weekend for my first investment and am particularly excited about this one. I ran the numbers and I'm scared they may be too good to be true! Please tell me if I missed anything out when calculating...

This property has 4 units listed for 98k. Obviously I could get it for less, but let's use the full asking price to be conservative. It is currently fully rented for a total of $2,175 per month and each tenants pays their own utilities. Here is the breakdown I came up with:

Rental income = $2,175 x 12 months = +$26,100
Property Taxes = -$2,343
Insurance = -$700
Property Management (10%) = -$2,610
Estimated Maintenance = -$3,000
NOI = $17,447

Mortgage Payment (30 at 5.5% years for 79k) = $400 x 12 months = -$4,800
CF = $17,447 (NOI) - $4,800 (Debt Service)
Cash Flow = $12,647 / 12 months = $1,053.92 per month

ROI = $12,647 (CF) / $98,000 (Purchase Price) = 12.9051%
Cap Rate = $17,447 (NOI) / $98,000 (Purchase Price) = 17.80%

Please let me know if and what I am missing please or if this looks like a good investment! Thanks!!

[Ned Carey]

@Frank Scala Lacking actual tax returns and verified expenses and income, you should count on at least 50% of income to go to expenses other than financing costs. This does look like a decent deal, just not as good as you think and have presented it.

Here are some expenses you have left off.

• Leasing fees, (usually in addition to management fees)
• Vacancy rate - as already mentioned
• Turnover costs
• Licenses and registrations
• Reserves for capital expenses
• Common area utilities
• Common area maintenance and landscaping
• Administrative costs LLC fees, accounting, bank fees etc.
• Etc