4 Family Analysis ~ This is a bad investment, yes?

[Joshua Martin]

Hey gang,

  So I'm looking to run more numbers on larger units, and just starting with a 4 family here and wanted a little feedback. It's a B area in Milwaukee (if you guys want to weigh in ;) and it's definitely not a deal but for a buyer with a long term play desiring modest cash flow I wonder how accurate my numbers depict the property (when I run my numbers most of the time properties in good areas look like terrible investments...)

  In any case, here we go (on a monthly basis, I find it easier):

Asking price: $295,000

GSI: $2,600 p/m (4 units @ $650 per)

Vac @8.3%: $215.80 p/m

Tax: 512.33 p/m

Utility: 202.58 p/m (per seller for electric, gas, and water - shared areas I imagine? In any case, due diligence required).

Maintenance @15%: 390 p/m This one is really the question. Seller has 120 p/m for property maintenance, grass cutting, etc., and cleaning of general areas. Don't know what type of budget to factor in for CapEx and repairs.

Management @ 10%: 260 p/m

Insurance: 100.19 p/m per seller.

Total Expenses: $1,680.90

NOI: $919.10 p/m

Debt Service w/ 30 yr @ 5% w/ 80% LTV, or 236,000 = $1,267 p/m

Cash Flow: - $347.90

Am I over-budgeting on certain items or is this just that bad of an investment? I won't bother with Cap or COC - can you run them negative? Lol.

Thanks in advance. And to property owners, this might seem simple, but after you've built up a certain dollar amount in the CapEx and vacancy budget I imagine you just pocket the remainder correct? What is your threshold? 1 month at 100% vacant?

You're the bomb gang.

Best,

  JTM