4plex Deal Analysis - thoughts?

[Matthew Carducci]

Good afternoon BP,  I have an opportunity to purchase a 4 plex (details below) in Clarksville, TN.  I'd be interested in having some of you analyze it and give me some feedback:

4-plex, 1200 ft2 each, 1x attached garage each, in vicinity of other multiplex units, but these 4 units are the only ones in the area with attached garages (garages at all).

Built 2009

Purchase Price: 375,000; Taxes 4,400; Insurance 1,000; Mgt Fee 8%, mnthly mx costs 4%

Current Gross Rent: 3x 775; 1x 750;

Market Gross Rent: 4x 850;

Doesn't appear to be any necessary maintenance; February 2016 Appraisal doc came up with 370,000 with comments on units being below market rent;

All utilities metered and tenant paid; trash on owner - $50; lawn care owner - $100/mo (summer months)

That being said, financing is still to be TBD.  Everyting from normal financing with 20% down (would be tough to find the 70-75k needed; 

Seller is interested in Seller's financing, but I haven't done it before, and I'd need advice on what terms are acceptable/standard. Id like to minimize cash in.  Advice?  Thoughts? 

Thanks,

Matt C

[John Leavelle]

@Matthew Carducci

First, you may not have that high of expense, if you are lucky.  However, as stated you did not include all expense areas.  Such as Vacancy, Credit losses (uncollected rent and skips), Pest control, legal, accounting, leasing.  You did include lawn care, but, how about snow removal?

Every property does not have every expense obviously.  But, you must go in expecting them until proven otherwise.  Good cash flow is extremely important to me.  That's why I am very conservative in analysis.

Here's how I generally break down the 55% expenses:

10% Property Management 

10% CapEx

5%. Maintenance./Repair 

5%. Vacancy 

5%. Credit loss

5%. Tax & Ins.

5% - 10%. Utilities, Lawn care, HOA fees, etc.

5%. Misc (Pest control, Legal, Accounting, Leasing)

Of course these are adjustable (I.e. newer properties need less CapEx)

Other things to consider are age of property, category of property and neighborhood (A, B, C, D).  A & B would probably have less tenant problems and turn over.  So less maintenance required.

Remember, this is my guidelines.  Others have less stringent ones.  You may analyze 100 properties, put offers in on 10, and end up purchasing only one.  I don't know about you but I don't want OK deals, I want good to great deals.