8 fam N of Boston, bow wow or is my math wrong? 1st X comm

[Jeffery Hood]

Dear BP community,

I saw an 8 family today that I liked, but my math tells me it's not for me. The asking price is $1.1M.  On the debt service, I was going to leverage a home equity line for the down payment with a 2.5% interest rate, but for analysis purposes I assumed debt service on the entire asking price at 4%. I can't get it to cash flow, am I missing anything?  I feel pretty strongly that the expenses are reasonably solid.  I've based my rental income on existing cash flow ... the seller suggest rents can be raised but figuring on actuals made more sense for me of course! 

This is my first time doing analysis on a commercial property so thank you all in advance for your input, it's greatly appreciated.

-Jeff

Revenue	monthly	yearly
Rental Income	$9,570	$114,840
vac rate @ 5%	-$525	-$6,300
Net rental income	$9,045	$108,540
Gross income	$108,540
Expenses
Property Taxes	$1,010	$12,120
Insurance	$508	$6,096
Prop mgmnt @ 10%	$905	$10,854
water/sewer	$168	$2,016
gas	$178	$2,136
electric	$140	$1,680
snow removal	$175	$2,100
trash removal	$10	$120
landscaping	$200	$2,400
M&R	$464	$5,568
Total Exp	$45,090
NOI	$63,450
Debt Service *	$5,252	$63,024
Cash flow?	$426
return on investment	n/a
capitalization rate	5.77%
cash on cash return	n/a
* assume $1.1M @ 4% for 30 years

[Joel Owens]

108,540 / 2 = 54,270 NOI

54,270 / 1,100,000 = 5 cap

If you are going to buy at that cap rate you might as well buy a single triple net property at a 6 cap to 7 cap with 2% annual rent increases, no landlord responsibility, and a 15 year lease.

This way the tenant pays all the expenses and you just cash the checks.

MULTIFAMILY even with a property manager is work. When you have to work an investment then it has to throw off extra yield to justify the time and aggravation.