9 unit Multifamily Deal

[Christopher Za]

Here's the breakdown of the deal:

9 unit multi-family in B area.

Purchase Price: $450K

Financing: 25% Down, 3.25% 5 year ARM, 15 year amortized

Amortized monthly payment: 2371 ($28,452/yr)

Additional Interest Payment*: 267 ($3200/yr)

Gross Rents: $6300 ($75,600/yr)

Taxes: 7200

Management (5%): 3780

Maintenance and Cap Ex (2% of purchase): 9000

Vacancy (5%): 3780

Water: 3339

Gas Elec: 7100

Insurance: 4020

Total Expenses: $38,219/yr (50.5%)

Net Income: 3115 ($37,381/yr)

Net Cash Flow: 477 (5729/yr)

Cash on Cash return: 5%*

Current DSCR: 1.31

* I am not putting any of my own cash into this deal. I'm offering an investor 2 pts above my ARM for the DP cash, plus 10-20% ownership of the LLC that will own the property.

- The rents at this property are currently about 10% below market.

- The owner is currently paying all utilities but it is accepted practice in this area to pass along utilities to the tennants.

- The insurance payment also seems to be high given my research (I've been ballparked a figure of $2700).

I'm pretty sure I can cut expenses and/or add rent to free up approximately $8,000 per year in cash flow, which would bring the DSCR to over 1.6. Cap rate varies in the area, but 8.5 is ballpark.