4 plex in American Fork

[Sophie P.]

Hi Everyone,

I'm currently looking at a deal that could be our first deal ever - It's very exciting but of course I'm trying to keep emotions out of it as this is purely an investment property. We are looking at it as a buy-and-hold.

I think the numbers look good but I thought I'd run it by the BP community first. Any inout would be greatly appreciated.

New build 4 plex currently under construction in American Fork, UT. Set to be completed in the Summer of 2017.

The Following Info is according to the information from the Developer:

Purchase Info

Initial Market Price: $700,000

Purchase Price: $649,900

Initial Cash Invested: $187,475

Income Analysis

Net Operating Income Annually: $52,484

Cash Flow Annually: 22,847

Financial Metrics

Cap Rate (Purchase Price): 8.1%

Cash on Cash Return (year 1): 12.2%

Internal Rate of Return (year 10): 19.6%

Sale Price (Year 10): $896,059

Rental Income is forecast to be $1,400 per unit

Units are 3bed, 2 bath and a garage

Units are 1,600 Sqft

I feel that the seller is optimistic on some of the numbers so in my calculations I have increased expenses (CapEx budget, management Fee at 8%, Insurance, Utilities) and I have also increased the vacancy rate from 3 to 5.2%.

According to my calculations our Monthly Income works out to $5,600 and Expenses to $4,380.

Would love to hear your thoughts on this.

Thanks so much!

Soph

[Steven Bond]

Sophie Parthesius and Becca Summers thank you for your post. Happy to discuss in full detail anytime. There is a great report posted on the FIG website as well in the blog section talking specifically about Multifamily vacancy rates and also the amount of permits to build and how that will affect vacancy as a whole over the next few years. I subscribe to quite a few metrics followings and believe Cushman Wakefield puts out excellent analytics on the numbers and forecasts based on facts and not emotional poppy ****.

Regarding historical performance every project we have done once stabilized has performed at or above our original projections used to sell them in the beginning.

Thanks again.