crunching numbers on first multi-family purchase (4-plex)

[Michael Wentzel]

So we've held two single-family homes as rentals for the last few years. We recently sold one and we're looking to purchase our first multi-family, a 4-plex.

Here are the numbers....

Purchase price- $85,000

Financing- $21250 down (25%), $63750 at 5.25%, fixed for 30 years

Monthly rents- $1950

Monthly expenses- $1248

Tax- $31

Insurance- $55

Management- $195

Vacancy- $100

Maintenance- $195

Mortgage- $352

Utilities- $320

Monthly cash flow- $702

Cap Rate- $12648/ $85000 = 14.8%

ROI- $8424/ $23412 = 36%

Rent over Purchase price= 2.3%

So in my inexperienced opinion, the numbers look great. The property has been well-maintained by the landlord. It currently has three units occupied. The property was owned by an elderly lady who passed away. It passed to her son who is also elderly and doesn't want the "hassle" of a rental property.

We are investing with a buy-and-hold strategy to eventually replace our income. So the most crucial numbers to us are the monthly cash flow and the ROI.

The market is Pueblo, Colorado. It doesn't hold much possibility for appreciation, but it is a stable community of about 100,000 people known for its low-cost of living.

Please feel free to share insights, concerns and/or feedback.

Mike

[Troy Fisher]

I was wondering why your Expenses were so high! Here's why. You've got your debt service in your monthly expenses. But then looks like you corrected that to get such a great cap rate!

Monthly expenses- $896

Tax- $31

Insurance- $55

Management- $195

Vacancy- $100

Maintenance- $195

Utilities- $320

Monthly cash flow- $1054

Also, why are utilities so high? $320/mo seems high. Are you paying for water? Is this something that you can pass through to the tenants on the next leasing cycle?

Buy these all day long!