Typical Example from MLS in Saint Petersburg (Tampa Bay)

[Faisal Farnas]

Hello BPers,

I am currently looking to purchase a multifamily in the Tampa Bay area. I have been looking at the properties on the MLS and so far the best I could find, in north Saint Petersburg (North of Central Avenue) is something like this:

Triplex on 27th Ave North

Asking Price: $179000

PI: $684

Taxes: $125

Insurance: $200

Water, Sewer, Trash: $225 ($75 per unit)

Vacancy (10% of monthly rent): $190

Maintenance (10% of monthly rent): $190

Management (10% of monthly rent): $190 

TOTAL EXPENSES: $1804

Projected monthly rents of $1900

Monthly Cash Flow: ~$100 !! 

Am I doing something wrong? I know this analysis is more on the conservative side, but this is the best I could find on the MLS! Are you guys seeing the same thing? Should I even bother looking on the MLS?

There are better cash flow properties on the south side, but honestly I don't want to buy in an area that I am not comfortable driving at night in.

Any thoughts or pieces of advice are greatly appreciated.

Thanks,

Faisal

[Zach Kidd]

Hi Faisal,

I'm a lifetime local resident, Real estate agent and Realtor. 

Your concerns are valid, but there are deals to be had, even on the MLS.

Using your example, you estimate a probable cash flow of about $100. Not bad (better than $1M in the bank), but not great either. 

First question - how much do you need to make in order for this deal to be a "win" for you?

I'm going to run fast and loose with the numbers for my convenience.

Given your assumptions, how can you either generate more revenue and/or reduce the expenses?

First is asking price. $180k isn't out of line ($60/unit), but this is where the most immediate savings can be found. Re-run your numbers at $160, even $150. 

Keep taxes and insurance the same.

Pass the utilities through to the renters. That's generally accepted practice in this area. Re-run your numbers.

Vacancy / Maintenance / Management - those are good guidelines, but not the actual numbers. Really good management may cost less, and keep your vacancy rate much lower. How many Property Management companies have you contacted? Is this an average number, or the actual quote from your preferred company? How do they handle vacancies? Proactively, three months before the end of the lease? Or reactively, two months after you lose a paying tenant?

Maintenance is another question - what is the effective age of the property? If it is old, you'll need to do more. If it's in excellent condition, you'll need almost no maintenance.

There are deals in every market. Finding them is one major step. Figuring out how to make them work the way you want is another.