Help with quick analysis of 4-plex

[Brendan Novisky]

I am looking at purchasing a 4-unit in Franklin county, OH and am looking for some other perspectives prior to putting in an offer. The details I know are:

Purchase Price: $289,000

Rents: range between $790-$875 (have not yet confirmed total gross income)

Taxes: $9,000

Utilities: All paid by tenants except trash

Desirable location that I expect to have stable growth but not massive appreciation

Mgmt: 6% + Lease up of full month (Currently long-term tenants want to stay)

The details I am estimating are:

Insurance: $2,800

Maintenance: 5%

Reserves: $300/door

At this point, when I do an analysis I can't see a way to get a decent return if the average falls closer to $790 but as the average gets closer to $875 I can see getting above 8%. Above 8% is acceptable to me but it may be a stretch with the numbers I am using. Any thoughts?

[Allen Fletcher]

@Brendan Novisky

Whenever you are analyzing a deal always go for worst case scenario. As an investor you are looking to have positive cash flow no matter what happens with the market. I would run the numbers in such a way that you determine what price you can purchase the property for and still get your desired return at $790/month/unit. Take that number, and build an offer around it. If the seller accepts then you just purchased a property that even when things are going poorly will cash flow and it things are going well you have a very nice cash flow.

I hope it goes well,

Allen Fletcher