Analysis Paralysis or Analysis Reality?!

[Hugo Castellanos]

Thanks for reading, and I would appreciate your opinion on the following:

I have been reading and trying to make the best out of my understanding of multi-family units, but every time I come accross something I like and I analyze following the steps I have learned here, the analysis seems to completely different to what others seem to be finding and making deals on... Is this the real world where there are only a few deals available for some few lucky ones with connections or am I missing something?

Please look at this example:

Beautiful Mansion in PA, bedroom community for NJ and NY

ASKING 750000

Rents: TOTAL 88,800/yr

1,200, 600, 1,100, 900 for apartments

a vacant apartment for 1,600 and a vacant commercial space on first floor for 2000, both of which were occupied by the previous owner for years, so I don't really know where they got these last two numbers. because of this, I estimated to be more like 1,200 and 1,500, which would TOTAL 78000/yr more realistically I thought.

Expenses: TOTAL REPORTED BY OWNER: 30218

tax 16,450

insurance 4,818

water/sewer 4,470

gas 273

lawn/snow 3,897

trash 1,020

I ADDED 26,640

for 10% VACANCY, 10% MANAGEMENT, 10% CAPEX

TOTAL OPERATIVE EXPENSES: 56,858

NOI: 21,142 (31,942 if I use his 88,800 NET INCOME)

CAP RATE: 2.82%

MORTGAGE SERVICE: 51,588 with 20% down loan 600,000 at 6% for 20 years

Meaning I would have to pay out of pocket 20-30K per year just to cover the loan.

For the Mortgage service to match the NOI and be cash flow neutral the price would have to be 312,500 (or 468,750 using his proforma income).

I can provide more examples like this, but I think the point is made... I find this asking price to be so out of proportion with the calculations I have done, that it is not even funny. That's why I am questioning if this is the real world and there are just 1% of properties out there that are good to even start thinking to make deals on? Are these properties offered by brokers to a select few with tons of connections and years of experience? But then, who buys these other properties at these prices? Someone must buy them since all I find are these outrageous prices... or will they remain unsold for months and months until the sellers realize they have to drop the price down significantly? Or am I making mistakes in my calculations?

Thanks for your opinions!

[John Leavelle]

Howdy @Hugo Castellanos

You definitely need to keep looking and analyzing properties.  You might look at 100 to get 10 to make offers on.  And only get one accepted only to find problems during due diligence and the deal falls through.  It's a process. It takes time and effort to find the deals you are looking for.  It also depends on the market you are investing in.  You might try narrowing your search to properties that meet certain criteria. Stay away for now from complicated properties like the one you mentioned.