5 Unit Analysis

[Peter R.]

Hi BP.  Looking at a 5 unit, would appreciate some thoughts if you have them.

5 units, all 2 bed / 1 bath:

Purchase Price: $275,000
Mortgage: 30% Down, 5.15% on 20 Year Amortization
Taxes: $2200/year
Insurance: $2000/year
Maintenance/CapEx: $6000/year
Management: 8%/$2902/year
Administrative: $1000/year
Vacancy: 7%/$2730/year

Rent: $3250/year

I'm getting:
39000 - Income
(2790) - Vacancy
(13702) - Expenses
22568 - NOI
(15437) - Mortgage
7131 - Cash Flow

$119/Month/Unit

Given these numbers, would you do this deal?  Anything jump out at you as off or not quite right?

Thanks!

[Michael Le]

It seems like your numbers are jumping around a bit.

You say rent is $3250/yr which I assume you mean $3250/m with a yearly gross of $39,000. Then you say Management is 8% and you list that as $2902/yr. Eight percent of $39,000 is $3120 not $2902.

Then you have Vacancy at 7% $2730. That is the proper number with gross rents of $39,000. However, when you're calculating NOI you have vacancy listed as $2790.

Then you have your expenses listed as $13,702. Adding up the numbers you listed it should come out to $14,102.

I'm not sure where this property is by $2200 in taxes seems low. If you're sure of those numbers then no problem.

So first of all I would say you need to be more careful and meticulous. The numbers don't come out too different but just pointing out the attention to detail required.

The other thing that stands out is that expenses are only coming out to about 40% of rents. It's usually 50-55%. So just make sure your numbers are right.