Four Plex Analysis

[Adrian Stamer]

Hello

first post, though I've been lurking for a while now. I am working on closing on my first deal in real estate right now, though I did own a couple rentals years ago. First multi unit as the previous ones were small SFH.

Anyway, the numbers are good on this first one no matter what I stick in, but now I am looking towards what is next so I want some feedback on these numbers for a 4 plex. The numbers looked good for a while but as I've modified and tweaked them they just aren't looking so great any more. I'm not sure if I've gone too conservative, these rents are simply low, or its just not a good move.

The list price is/was $175k, though it is currently off the market for now. They have been trying to sell for a while now. The current owner is out of state and purchased it in 2004 for $164k. Two of the 4 units have been recently renovated.

I am budgeting $165k price, 3k improvements (condition seems fine), $8,250 closing (5%).

Mortgage would be through a local bank, 4.5% w/ 5 yr balloon, 20 year amortization. Payment comes out to $835.

Gross rents for $1,950 monthly or $23,400 yearly.

10% Vacancy $2,340

Property Taxes $1,850

Insurance $1,200 (guess)

Maintenance & Repairs $2,100 (just used 10% of gross rents)

Utilities $800 (water + sewer + trash - estimate, though I'd have to double check to make sure this is in fact paid by landlord. Going on the assumption it is.)

Advertising & Admin $250 (more of a misc buffer costs)

PM: $2,948 (14%), though it is fully rented and actually it'd be 50% first month and 5% PM using a combination of my father who is local partially managing it and me dealing w/ some remote internet marketing.

So actually PM I would be using would be based off 5% ($1053) + $400. Just another estimate.

So with the 14% PM estimate the NOI comes out to: 12,077 (48.39% gross)

W/ the actual PM the NOI comes out to: 13,572 (expenses 42% of gross)

So with these numbers currently cash flow is very low, $150-$300 w/ ROI at 4.65% to 8%. With equity considered the total return comes in at 14.92% to 18.3%

There is a coin laundry on site, no revenues are included from this. One downside to the property is no off street parking and while the area isn't busy, there is no on street parking on the street. There is an used parking lot next to it which spots can be rented from though. Currently its fully rented and none of the tenants have cars.

Lastly, its proximity is very close to a small college, though in a slightly worse area. Though this is "small town" worse area which I don't consider much of a problem. The rents seem a little low, but the 4 plex is only 2800 sq ft so the actual apartment spaces sound a little on the small side for a 4 plex.

Anyway interested to see what everyone thinks about my estimated numbers and at what numbers this deal would work. I am also looking at a similarly priced deal w/ rents a couple hundred higher too, so I can apply the feedback to this one too.