Looking to buy 12-unit multifamily in Miami

[Noah Andrews]

Hi everyone! I am currently looking at this 12 unit multifamily deal in Miami. I plugged in some numbers for the property to get a rough estimate of what I am looking at, but wanted to know what you guys think.

I used Lendlord’s “Invest” tool, which was pretty useful if any of you were wondering.

[Greg Scott]

Looks like it could be good. Here are a four thoughts.

Are you sure you can get a loan at 5% interest?  What I'm seeing now is a bit higher.

You have not put any cash in the analysis for CapEx. In my experience, there is always something that you wish you had extra cash to fix / upgrade. It's better to bring the cash up-front into a deal.

You have no cash for Operating Capital.  Transition, in particular, can create some cash-flow stress.  What happens if you find 1/2 of the residents haven't paid and need to be evicted?  You should have enough cash in the deal to cover you through that time period.  On a small property, I'd probably look to have about $2K per door, minimum.  On larger properties (100+ units), we try to keep $1K per door minimum.

You have 95% Physical Occupancy or 5% Physical Vacancy.  The model you are using does not appear have any formula for Economic Vacancy which would include Physical Vacancy plus bad debt, and any other reason you aren't collecting rent on a unit.  5% Economic Vacancy is VERY  light.  On a stable, well-run asset, we typically see 8-10%.  

Good luck.