First purchase analysis

[Ross K.]

New investor here (San Antonio) and am narrowing down to a few properties and would appreciate your thoughts on one 4-plex in particular. Here's the details:

1ea - 2bd, 1bath

3ea - 1bd, 1bath

Price: $155,000

Monthly Rent: $2,235

Financing: 25% down, 5% 30 yr conventional

Estimated closing costs: $4,000

Cash need to close: $42,750

Monthly Property Tax: $202

Monthly Insurance: $70

Property Mgmt (10%): $233.50 (paying myself)

Vacancy (%5): $111.75

Repairs (15%): $335.25

Utilities (water only): $200

Monthly Cash Flow: $467.94

Cap Rate: 8.5%

Cash on Cash Return: 13.14%

Using the 50% rule, the monthly cash flow is $493.44, with a 13.85% CoC return.

The property was recently rehabbed, with very little deferred maintenance. The seller's agent states that the seller has extensive actual financial data for review once the property is under contract, but they state its at 8% cap (actual), which comes close to my due diligence. Your experienced thoughts would be appreciated!

[Sharad M.]

Hi @Ross K.

I think your PM number should be $223.50 instead of $233.50. Small difference, but I thought I point out.

These are the numbers I came up with:

4 Plex - SA analysis

Because 3 of the 4 units are 1 bed/1 bath, I would keep the vacancy a little higher to 10%, because the turnover is generally a little higher for 1 beds compared to 2+ beds.

Otherwise the deal looks good on paper. How does it compare to other deals on the market?

How long has this one been on the market?