Portfolio acquistion, first investment

[Anthony Larson]

just returned from deployment I'm looking at this property to buy, so i can focus on school, and not work

17 unit and 12 unit building
17 unit building mix
15 unit rooms at $328 a month paid week 2 units $640 month
parking laundry incom $87
total month $6150
Total Annual $74000

12 unit building mix
8 efficiency $520 a month
4 rooms $390 a month
parking laundry income $152/month
Total Month $5700
Total Annual $68000

Actuals from Realtor
MONTHLY INCOME For 2009
2009
MONTH RENT COLLECTED Laundry TOTAL RENT COLLECTED Laundry TOTAL
JAN $5,810 $100 $5,755 $100
FEB $3,430 $100 $4,055 $100
MAR $3,782 $100 $3,640 $100
APR $3,030 $100 $4,573 $100
MAY $5,507 $100 $3,580 $100
JUN $4,392 $100 $3,277 $100
JUL $5,467 $100 $3,060 $100
AUG $5,730 $100 $4,526 $100
SEP $4,390 $100 $6,855 $100

TOTALS $41,538 $900 $39,321 $900

AVERAGE MONTHLY INCOME $4,615 $100 $4,715 $4,369 $100 $4,469

Annualized Average x 12 $55,384 $1,200 $56,584 $52,428 $1,200 $53,628

expenese
2008 Taxes (actual) $5,716 $7,985
electric (actual) $9,252 $8,352
Water / Sewer (actual) $1,362 $2,118
Insurance (actual) $1,350 $1,455
Rooming License (actual) $216 $0
Repair & Maintenance (projected) $3,000 $3,000
management 5% (projected) $3,190 $3,101
Reserve (projected) $1,800 $1,800
Total Expenses $25,886 $27,811

On market for $603000

Am I overlooking anything, it seems with favorable financing this property well work out nicer.
Great first investment to set up my business a foundation if you well.

Looking for insight, help, things to look out for, great loan companies, cash partners, anyway you can help I'd very much apprecitate it.

[Jon Holdman]

OK, here are some evaluations for your consideration. All are based on the asking price of $603K.

I assume the expense number you list of $25,886 and $27,811 are intended to be annual numbers. If so, they're totally ridiculous and will NOT be what you experience. I'll use the 50% rule. Read in the rental property forum about rental property expenses. There are several sticky threads on this topic. Ignore it at your peril.

Basic numbers, monthly:
Rent: $11,920 - gross scheduled rent
Expenses: $5,960 - 50% rule
NOI: $5,960

First, assume a very attractive loan at 6% for 30 years. This is possible right now on investor loans for SFRs, but probably not for these buildings

Payment: $3,615
Cash flow: $2,342
Cash flow per unit: $80.85 - not bad, but some would consider this low. Especially for low rent units ($328 a month is low rent) weekly payment units

This assumes 100% financing, which is impossible. Assuming 25% down I get:
Down: $150,750
Loan: $425,250
Payment: $2711
Cash flow: $3,249
Cash flow per unit: $112
Cash on cash return: 26%

I'd actually consider that pretty good, though again, this seems like a higher-than-average effort property.

I don't think you'll get those loan terms, though. So, lets use 8% and a 20 year amortization schedule. You'll probably be looking at a five year balloon, too. Same 25% down payment.

Payment: $3,782
Cash flow: $2,177
Cash flow per unit: $75
Cash on cash return: 17%

Still not bad.

I think the price is a little too high. $510K seems better to me. Plugging that into the last analysis gives:

Down: $128K
Loan: $383K
Payment: $3,202
Cash flow: $2,758
Cash flow per unit: $95
Cash on cash return: 25%