4 plex in C/C- market

[Jesse Richardson]

BP, What do you think?

Total Number of Units 4

Purchase Price $80,000

Initial Cash Invested $36,600

Income Analysis Monthly Annual

Net Operating Income $1,250 $15,006

Cash Flow $928 $11,141

Financial Metrics

Cap Rate (Purchase Price) 18.8%

Cash on Cash Return (Year 1) 30.4%

Internal Rate of Return (Year 10) 34.3%

Sale Price (Year 10) $107,513

Purchase Price $80,000

- First Mortgage -$60,000

- Second Mortgage -$0

= Downpayment $20,000

+ Buying Costs $1,600

+ Initial Improvements $15,000

= Initial Cash Invested $36,600

Total Number of Units 4

Cost per Unit $20,000

Average Monthly Rent per Unit $625

Mortgages First Second

Loan-To-Cost Ratio 75% 0%

Loan-To-Value Ratio 75% 0%

Loan Amount $60,000 $0

Loan Type Amortizing

Term 30 Years

Interest Rate 5%

Gross Rent $2,500 x 12 = $30,000

Vacancy Loss -$200 -$2,400

Operating Income $2,300 $27,600

Expenses (% of Income) Monthly Annual

Maintenance (5%) -$115 -$1,380

Insurance (2%) -$50 -$600

Management Fees (10%) -$230 -$2,760

Taxes (13%) -$306 -$3,674

Utilities (8%) -$183 -$2,200

Capital Expense (5%) -$115 -$1,380

Lawn Maintenance (2%) -$50 -$600

Operating Expenses (46%) -$1,050 -$12,594

Net Performance Monthly Annual

Net Operating Income $1,250 $15,006

- Mortgage Payments -$322 -$3,865

- Year 1 Improvements -$0 -$0

= Cash Flow $928 $11,141

Would you do it?  Do you think the estimations are off or low?

Thanks,

Jesse 

[Rick C.]

@Jesse Richardson - Overall, the numbers look good, except for your capital / maintenance expenses. I would expect those combined to be closer to $600 monthly, because you will likely have a lower class of tenants and you will be dealing with 4 separate units, which means 4 separate bathrooms, kitchens, etc to maintain.

I cannot get much more specific though, given that I do not know anything about the layout of the building or the specifics of the neighborhood.