9-unit multifamily in South Louisiana

[Justin Guidry]

Hey guys, 

Been reading the forums and listening to the podcast for awhile now and I've learned a ton. I started looking into real estate about a year ago, but i got laid off so I hit the brakes on doing anything. Fortunately I got my job back in April and now I'm more motivated than ever to get into real estate investing before something like that happens again. 

I found a 9-unit multifamily in South Louisiana that I'm really interested in and would like any advice I could get on the deal. It has (5) 2 bed/2 bath and (4) 1 bed/1 bath. Also has additional room to build 9 more units on the opposite side of the lot. Rent is appropriate for the area. It has been listed for over 550 days and was first listed at $750,000 and now it is down to $575,000. The current owner has furnished and pays the utilities for some of the units. Thanks in advance. 

Asking price: $575,000                 

Total gross monthly rent: $7,970. Yearly: $95,640

Expenses:

• -Electricity (for the units he pays the utilities)- $500/mn
• -Water and sewer- $225
• -Garbage- $60
• -Insurance- $252
• -Property tax- $91.08
• -Cable- $450
• -Lawn care- $75
• -Vacancy- 5%- $398.50
• -Repair and Main. - 3%- $239.10
• -Capex- 10%- $797
• -Property management- 10%- $797. (Plan on managing myself)

Total expenses: $3,884.68/mn....... Yearly: $46,616.16

Gross rent $95,640 - Expenses $46,616.16 = $49,023.84 NOI

NOI $49,023.84 / Purchase price $575,000 = 8.5% cap rate

$49,023.84 - Principal and interest $27,969 = $21054.84 cash flow.... $1,754.57/mn

$21,054.84 / $140,000 ($20,000 closing cost, 20% down $115,000, $5,000 repairs) = 15.0% cash on cash

Any advice would be greatly appreciated. Looking forward to hearing from you guys. Thanks.

[Brent Causey]

First thing I would do is check to see if the units are individually metered. If so, I would stop paying their power. Unless these units are just super hard to rent or that's the only way they'll rent at that price point. Same goes for cable. There's another 12k in your pocket just by making the tenants pay that. Just my $.02