6-unit, Below Market Rents, FSBO, Owner Wants to Retire

[Marc Dela Cruz]

I have a deal. It's my very first deal, so I don't want to screw it up. I appreciate any tips and advises.

6-unit each 2bdr 1 bth - Asking Price: $1,200,000 ($200k per unit)

ACTUAL

Income: $84,000 ($1,166 per unit; below market)

Expenses:  $23,205 (27.63% EGI, $3,867 per unit)

NOI: $60,795

Debt Service: $48,123 (30% down, 30yr am., 4% int.)

Cash Flow: $12,671

Cash on Cash: 3.52%

Debt Coverage Ratio: 1.26

Gross Rent Multiplier: 14.29

Occupancy Break Even Point: 84.91%

PROFORMA

Income: $158,400 (market rents)

Expenses:  $23,205 (27.63% EGI, $3,867 per unit)

NOI: $135,195

Debt Service: $48,123 (30% down, 30yr am., 4% int.)

Cash Flow: $87,071

Cash on Cash: 24.19%

Debt Coverage Ratio: 2.81

Gross Rent Multiplier: 7.58

Occupancy Break Even Point: 45.03%

Exit Strategy

PROFORMA VALUE: $2,703,900 (NOI/5 CAP)

Cash-out Refinance: $2,027,925 (75% LTV)

Loan Principal Balance: $840,000

Initial Investment: $360,000 (down payment)

Net Profit: $827,925