10-Plex pros and cons

[Drew Shofner]

I recently ran an analysis on a lake front 10-plex in Avon Park Fl. I live in Orlando so it is over an hour and a half away. The asking price is 250K, I can rent the 10 units for at least $650 per unit, after repairs. It needs at least 50K in repairs.  Also this would be the first deal that i've done on my own. I want to know if there is anything I need to look out for.

[Andrew Johnson]

@Daniel Duque Debt service is basically your mortgage calculator number and unscientifically rounded up.  I never know what closing costs will be but it will be *something*.  Most of the time people try to roll those costs into the loan balance.  Consequently, the loan amount tends to be a little higher than the projection so the payment ends up being higher as well.  Again, these are first-blush calculations.  The point isn't to get mired into the details.  My point would be that a 28% cash-on-cash return seems great.  But it's based on your figures of "renting for at least $650 per unit".  Since it's "after repairs" or "at least $50K" I'll posit that they aren't renting for $650 per unit today.  I'd be more curious what they rent for today, how sure you are about your renovation budget being 90 minutes away, etc.  The reason is that based on your projections it's an "easy yes".  My contention is that "easy yes" commercial multifamily deals are usually circulated as pocketed listings before getting pushed out.  If the entire local Orlando market passed on a 28% cash-on-cash deal I'd wonder why.  I'd wonder if my rent calculations were optimistic.  I'd wonder if my renovation budget was low.  Basically, I'd wonder what I'm missing that the local investor pool knows.  

However, this is all based on my experience.  Whenever a deal looks really, really, really good on paper...it's because I'm missing something sitting here in California that I'd know if I was on the ground where I invest.  You could be in a different spot where you know the area intimately, have a really good pulse on renovation costs, etc.  That's not me.  And I also happen to think that 28% cash-on-cash is pretty darn good.  For all I know that's "normal" or "low" for the Orlando market.   So take my thoughts as a grain of salt :-)