Is this 7 plex a deal?

[James Allen]

Im trying to analyze a deal, but im not sure i've put everything in the calculator properly.  Its a 7 unit building where 6/7 units are rented.  Asking price is $230k (i know they are willing to work down).  Currently the scheduled rents are $3,550 per month.  Projected annual expenses are $23,043 which includes property management.

I apologize for missing information, but hopefully through the discussion, I can add to the above info and get to a decision on this.

[Brent Coombs]

Originally posted by @James Allen:

When you say "2%/m gross return" are you referring to the 50% rule?

The "2% rule" means gross rent would be 2% of its purchase price, per month. ie. $3,550 ALMOST equals 2% of the $180k that you think you may be able to get it for, per month.

If you can get 2% in a neighborhood that say, generally gets 1%, that's certainly worth looking into!

I usually recommend quoting all your anticipated expenses as a proportion of maximum gross rent, so if your expenses (not including your mortgage) arrive at MORE than 50% rent, that's not good to see (and, can they be reduced)? But if those expenses are anticipated to be a lot LESS than 50% rent, the question becomes - have you taken everything into account?

Of course, these rules-of-thumb do not apply to every property eg. new ones, and/or ones located in expensive neighborhoods.

But for older properties, in middling neighborhoods, they can be surprisingly useful. Cheers...