Analyzing a 5 Unit Rental

[Account Closed]

Good Afternoon!

I've been looking at a bunch properties and i think i've finally found one that would be a good first investment and i was wondering if the community at BP could help me out at all?

It's a 3 story, 5 unit apartment building. It's in the center of a small town that's growing.

The taxes seem really high, but it still seems to cash flow when i run my numbers. 

Question: How would I or could I appeal the taxes and get them lower?

I'm not sure if i'm missing anything else, so any advice would be great before I jump in...

Here are my figures (calculated monthly)

Purchase Price: $93,000.00

-----------------------------------------------------------------------------

Total Rent: $2,730.00

Insurance: $52.00

Property Management: $163.80

Capital Expenses: $273.00 (i just used a 10% estimate)

Maintenance: $136.50 (5% of Total Rent)

Vacancy: $163.80 (avg vacancy for the area is 6%)

Utilities: $448.25 (this number seems high, but i flesh out below where it's coming from)

Taxes: $593.95 (this seems really high and i'm wondering if there's a way to get it down.

Mortgage: $499.00 (93k @ 5% interest rate over 30 years)

Cash Flow: $399.70

Net Income - Mortgage: $898.70

Cap Rate: 12%

-----------------------------------------------------------------------------

It needs 1 new hot water heater, but he'll have that replaced before purchase.

1 unit is vacant, but again, it'll probably be filled before i purchase it.

There could definitely be some other repairs, but nothing major and just maintenance things that aren't urgent.

Utility Explanations

Monthly Utility Averages for 2017 YTD:

• Gas: $72.43 (for hot water only, no heating bills are paid)
• Electric: $39.31 (For common area lighting and circulating pumps on boilers)
• Water: $72.95
• Sewer/Refuse: $263.56 (Charged by the unit for refuse + usage for sewer portion)
• Total Monthly Utilities: $448.25

This seller also has other properties for sale that if this one works out, it might be a good way to grow my portfolio.

Some Property Pictures

Apartment 5 (only one I have pictures of right now but most are laid out the same)

[Ryan Scott Isacksen]

Maintenance and insurance estimates look low.
Did a management company quote you a rate or is that an estimate?
Management varies a bit and you can run into crazy things like a company that charges to rent their 'for lease' sign.

Did you get a quote on the insurance and does it include 'landlord insurance' - basically a general liability policy and lost rents?

What have the annual expenses for maintenance been for the past 2 years?

Are you sure you can get a 30 year fixed on a commercial (5 unit) property?

Call the tax adjuster and ask what taxes would be if you bought a building for x amount.