6-plex numbers & questions

[Chad Adams]

Asking Price $180,000

Gross Monthly Rent = $2,650

Additional Income = $175 (plus or minus; laundry)

Owner pays water & trash (I don't have numbers yet), tenants pay electric.

Taxes = $1,400/yr

Based on those numbers it seems like a something to take a closer look at...agree?

Other info/concerns:

It has a tile roof (rare for my area), can see some chips from the ground.

Nice neighborhood.  Safe, no crime to speak of, kids playing and people taking walks when I drove by.

I asked selling agent for rent roll and utility bills.  She respond with, "they really don't keep good records on the property". She will send me what she has been given, but it is probably sketchy at best.

[Roy N.]

@Chad Adams 

I think the insurance number is low, but I do not know your area.  I also find the property tax extremely low ... but I live in Canada, so almost everyone's property tax looks low.

What about the house meter for hydro?  You have a laundry room, so most probably there is a house meter and a house hot water heater.

What about lawn care and (if necessary) snow removal?

I threw you numbers into my modelling tool with the following changes:

I used the ask price: 180K

maintenance - 10%

vacancy allowance - 10%

Insurance - 1K/yr {rather be too high than too low}

lawncare/snow removal - $75/mth,  $900/yr

Hydro (House) - $100/mth, $1200/yr

Water/sewer - $85/mth, 1020/yr

Garbage - $85/mth, 1020/yr

Mortgage: an LTV of 75 and 6.0% interest rate with a 30yr amortization.

an opportunity cost of capital at 8%

 a 15 year hold period.

Did not count laundry revenue

This brings your OE to ~1025/mth,  ~12,300/yr  ... an operating ratio of ~43% ... which strikes me as low, but wonderful if true.

Just to be pessimistic, I added in another 2000/year of misc expenses to bring your operating ration to 50%

With all of the above in the mix, I get a debt coverage of ~1.4 and a CoC of 10.5% Which is passible.

If you could purchase for 165 to 175K and the real expenses are closer to $12-13K/year, then this is will be a good investment with the following caveats:

- I did not budget for upfront capital improvements that you would need to do at purchase;

- Since I know neither the market nor the property, I modelled with no property value appreciation and no rent improvement.