Am I being too conservative when analyzing deals? (Philadelphia suburbs multifamily, PA, Pennsylvania)

[Matt Whitermore]

When analyzing deals (multifamily rentals, usually 4-20 units) I have found that it is rare that a deal meets my criteria (even when it meets the 1% rule). I am typically looking for at least $100 cash flow per unit and at least a 10% cash on cash return.

I like to be conservative when underwriting annual expenses, and my typical underwriting guidelines are:

Insurance - $500/unit

Trash Removal - $1000 for under 10 units, $2000 for over 10 units

Advertising & Marketing - $250/unit

Liscenses & Fees - $50 to $100/unit depending on county

Repairs and Maintenance - 5% of gross rental income

Snow Removal & Landscaping - $1000

Management Fees - 5% of gross rental income

Real Estate Taxes - from public record

Utilities - use figures from listing or $150 per month per unit

Could it be that most listings are grossly overpriced or am I being too conservative? Any input on my expense figures would be greatly appreciated.

[Matt Whitermore]

@Steve Francis

Thanks for the input.

I love when a listing agent claims the listing is an 8 cap and shows that the NOI is the gross rental income minus only the tax expense.

It seems like most "8-10" caps (according to listing agents) are actually 4-5 caps when you apply realistic expense figures. Its kind of a joke.