Deal or No Deal - 7 unit residental property in Central PA

[Andrew Bosworth]

Looking for BP feedback on a potential property:

7 unit property near Harrisburg, PA.  Currently vacant, in need of some updates and renovations.

Purchase price: $160,000
Renovations: $50,000
Closing costs: $7,000

Monthly Income: $4,200

Monthly Expenses: $1,483

-Vacancy (5%): $210
-Insurance: $108
-Maintenance (12%): $504
-Taxes: $284
-Management (6%): $252
-Misc. Owner Expenses: $125

Financing: TBD

Stable market, highly visible location, off-street parking, close to amenities and transportation.  Value-add deal.

[Jay Dewberry]

My first question would be are you responsible for any utilities? I also didn't see a budget for CapEx, which would be a very important oversight to correct IMO. Closing costs seem high, but perhaps there's a reason. I would also ask are you getting a discount for Property Mgt.? Seems a little low also. Nevertheless, what I did was factor in 10% for CapEx. I assumed $100/mo for water and financing at 20% down for 30 years @ 5%interest. My results are:

Monthly Income:
$4,200.00 Monthly Expenses:
$2,858.13 Monthly Cashflow:
$1,341.87 Pro Forma Cap Rate:
11.22% NOI:
$24,348.00 Total Cash Needed:
$89,000.00 Cash on Cash ROI:
18.09%

Based on these findings, IMO it looks as though you'll have a good deal at almost $200/door. Hope it all works out.