Starting in Multi-Family

[Ryan Dossey]

Hello guys we just started mailing multi-family and I already love it. The people are more friendly for the most part and the deals are BIGGER. I had a seller send me some #'s and I was hoping you could check my deal analysis. Any pointers or advice is greatly appreciated. Property in question is a 9 unit in a decent area. 

Asking price is 565k. Property has a boiler. However he had larger gas lines and things installed needed to get it off the boiler. One unit is individually metered. The other 8 just need to be converted. (possible upside there)


Expenses= $20,079
Income= $69,780

NOI=$49,001
Cap Rate= 8.6 %

Tax 6095 Ins 4625

Gas 4183

Sewer 2376

Water trash 2800

3 of each

2 bed

800

700

800.

Monthly Total=2300

1bed

690

550

600

Monthly Total=1840

Studio

550

550

500

Monthly Total=1600

Laundry 75

Income=$5815 monthly

[Nadia White]

Hi Ryan, here is a rule of thumb when you don't have all the numbers. 

Income: all the rents + other income = X

Vacancy rate: at least 10%, no matter what your seller tells you. Otherwise, use the higher number given by the seller.

Expenses: if bills paid by tenants ==> 45% of (X * vacancy rate)  /  if all bills paid ==> 55% of (X * vacancy rate). = Y

NOI: X - Y

In your case: 

Gross Scheduled Income: 5,816 *12 = 69,780

Vacancy (10% because the seller didn't give you anything else to work with): 69,780 * 10%= 6,978

Adjusted gross income: 62,802

Expenses (55%): 34,541.10

NOI: 28,260.90

My take on this is that the seller is asking you at least 2x too much.

Unless of course, the seller can prove you that there is no more vacancy, that there is no deferred maintenance, that the tenants are paying on time, etc. by providing you all the financials.

Good luck!