Multi Family - Is this a good deal

[Tasha Mckoy]

I'm interested in purchasing this 4 plex in my area. Its a 4 unit building with two separate addresses 5812 and 5814. Each side has two 1+1s.

Here are the numbers.

The owner is has them on the market at $139k each. She will do seller financing at 40% down. (this is what they are asking, but I should be able to work the numbers down)

The units are at rent control and total about $2154 a month.

Expenses are about $800 a month. The cap rate in this area is around 6%

How do I determine the value of the building based on the cap rate?

Is this a good deal?

Click on the link below for the spreadsheet of the deal.

Deal

Thanks for your help!

[Steve Vaughan]

Hi @Tasha Mckoy . A realtor that's also an investor? Wish I had a good one here! I did a 2-second analysis on your spreadsheet and said 'no thanks'. Not even factoring in rent control, I need my multi's to be as clost to 100x monthly rent as I can get. I have purchased fancier A+ buildings in A neighborhoods for more, but only short-term. Add value through mgt or tenant changes and sell. They don't pencil out for me as buy and holds. That being said, it is hard to purchase for 100x rent, even in my area. Cap rates here are closer to 9-10% and hard to find at that. Cap rate in general as you know, is not the primary valuation factor in small multi's, either. It's comps. In your area, you seem to be facing higher prices, lower COC returns. Since you know this is a reasonable price for your area, I would look into the seller's situation and maybe educate her with some numbers like your spreadsheet. 40% down is a lot. Does she need the money or just more security? I have given sellers references of other sellers I have worked with and my personal financial statement to ease the fear of default they have, reducing my down payment. Is this your first investment? Good luck and please keep us posted!