Commercial Multifamily Deal: Good Deal or No?

[Manco Snead]

Greetings good people,

I am hoping to get some feedback from those more experienced than I on this deal. I own one property (duplex) and am new to commercial properties. I only have rough #s, but believe it would look like the following.

Property in question:

8 unit multifamily (Units are 2 bed/1 bath, built in 1992)

Asking price : $1,150,000

Annual taxes: $6,860

Mortgage estimate : $4900/month

Rents: unsure but likely approx. $1000/unit

After PITI, prop. management/vacancy/ expense savings I am seeing cash flow of $1200/month.

Financing:

Down payment: 25% via cash out refi my duplex (it has appreciated alot)

Remainder will be financed.

The conundrum:

Duplex currently cashflows at $800 (after prop. management, vacancy, save for expenses, etc). If I refi the cash flow will likely change to $0. BUT, I would now also have an 8-plex.

Duplex purchase price: $265K

Duplex current market value : possibly $700k

Also, I am unsure on the cash on cash return for the 8 plex, which I believe would be around 5%. I think this is low, but each unit would cashflow at $150/month which seems reasonable. For the area I am in (western Washington) the price on this property is pretty good. An additional thought is to sell the duplex, but I am reluctant as it is in an excellent town in an excellent neighborhood.

Much thanks to anyone willing to give feedback, ask me questions etc.

[Greg Scott]

Your thinking and your math are single family oriented (duplexes are treated as single family for financing).

The math and business plans are different in multifamily (5+ units). You haven't provided enough information to assess if this is a good multifamily deal outside of the initial CoC. What are your opportunities to grow NOI and CoC?