Worcester MA - Multifamily Deal Analysis!

[Eric Rosiello]

Hi there! As a new member to the Bigger Pockets community, I thought I’d dive right in and make my first post a Deal Analysis! A little bit about me … I currently live in Boston but grew up around the Worcester area. I own zero properties and first became interested in real estate investing a few months ago. A friend and I are discussing going into business together, and so far we’ve been browsing multifamily properties on Redfin in the Worcester and Greater Boston areas. We have around $40,000 liquid and have combined W2 incomes of ~$160,000 per year.

I'm eager to hear your guys' thoughts on the assumptions I'm using below (too conservative, not conservative enough?), the Worcester multifamily market and particular this area (Clark U), potential financing options for us … and anything else you might add! We plan to make it out to the Waltham Black Diamond REI meeting next Tuesday and look forward to meeting some of the BP community! Anyways, here is my deal:

General/Purchase:

Address: 48 Beaver St, Worcester MA 01603

Units: 3

Bed / Bath: 9 / 3

List Price: $265,000

Closing Costs: $2,500

Repairs: $5,000

After Repair Value: $271,000

Initial Cash Investment: 34,000 (10% down)

Monthly Figures:

Income:

Rent: $3,129 (Listed on Redfin)

Expenses:

Mortgage: $1,173.28 (30 year, 4.25%)

Electric: $58.33 (Redfin listed annual cost + $100 buffer)

Water: $60.42 (Redfin listed annual cost + $100 buffer)

Sewer: $72.92 (Redfin listed annual cost + $100 buffer)

Garbage: $75

Insurance: $158.33 (Redfin listed annual cost + $100 buffer)

Taxes: $274.08 (Redfin listed annual cost + $100 buffer)

Other (Redfin listed annual cost + $100 buffer): $100

Vacancy: $187.74 (6% of rent)

Repairs: $250.32 (8% of rent)

CapEx: $250.32 (8% of rent)

Property Management: $312.90 (10% of rent)

Total Expenses: $2,973.64

Monthly Cash Flow:

Income – Expenses = $155.36

Future Assumptions:

Annual Income Growth: 1.5%

Annual Property Value Growth: 1.25%

Annual Expenses Growth: 1.5%

Description	YEAR 1	YEAR 2	YEAR 3	YEAR 4	YEAR 5
Annual Income	$ 37,548.00	$ 38,111.22	$ 38,682.89	$ 39,263.13	$ 39,852.08
Annual Expenses	$ 35,683.68	$ 36,007.75	$ 36,336.67	$ 36,670.53	$ 37,009.40
--Operating Expenses	$ 21,604.36	$ 21,928.43	$ 22,257.35	$ 22,591.21	$ 22,930.08
--Mortgage Payment	$ 14,079.32	$ 14,079.32	$ 14,079.32	$ 14,079.32	$ 14,079.32
Annual Cash Flow	$ 1,864.32	$ 2,103.47	$ 2,346.22	$ 2,592.60	$ 2,842.68
Cash on Cash ROI	5.48%	6.19%	6.90%	7.63%	8.36%
Net Operating Income	$ 15,943.64	$ 16,182.79	$ 16,425.54	$ 16,671.92	$ 16,922.00
Cap Rate	6.02%	6.11%	6.20%	6.29%	6.39%
Property Value	$ 274,387.50	$ 277,817.34	$ 281,290.06	$ 284,806.19	$ 288,366.26
Total Cash Flow	$ 1,864.32	$ 3,967.80	$ 6,314.01	$ 8,906.61	$ 11,749.29
Beginning Loan Balance	$ 238,500.00	$ 234,556.93	$ 230,446.28	$ 226,160.93	$ 221,693.45
Ending Loan Balance	$ 234,556.93	$ 230,446.28	$ 226,160.93	$ 221,693.45	$ 217,036.10
Equity	$ 39,830.57	$ 43,427.99	$ 47,075.41	$ 50,773.67	$ 54,523.61
Total Profit if Sold	$ (6,024.49)	$ 3,447.99	$ 13,378.64	$ 23,779.04	$ 34,661.14
Annual ROI if Sold	-17.72%	4.95%	11.70%	14.18%	15.09%

Key Figures:

Monthly CF: $155.36

Annual CF: $1,864.32

1st Year Cash on Cash Return: 5.48%

Annual ROI if sold after 5 years: 15.09%

Adjusted Key Figures:

If 20% down instead of 10% …

Monthly CF: $285.72

Annual CF: $3,428.69

1st Year Cash on Cash Return: 5.67%

Annual ROI if sold after 5 years: 10.70%

If $240,000 is the purchase price instead of $265,000 (ARV = $246,000)…

Monthly CF: $266.05

Annual CF: $3,192.56

1st Year Cash on Cash Return: 10.14%

Annual ROI if sold after 5 years: 17.49%

If Property Value Growth is 2.5% instead of 1.25%…

Monthly CF: $155.36

Annual CF: $1,864.32

1st Year Cash on Cash Return: 5.48%

Annual ROI if sold after 5 years: 20.39%

If Property Value Growth is 0.0% instead of 1.25%…

Monthly CF: $155.36

Annual CF: $1,864.32

1st Year Cash on Cash Return: 5.48%

Annual ROI if sold after 5 years: 8.94%