4-Plex Analysis Fresno, CA

[Anmmar Alsaggaf]

Dear BP, I have a 4-Plex that grosses $28,880 per year ($2400 x 12) and all units are fully occupied. In order to calculate my overall cap I did the following (annual basis): 

Gross Income = $28,800

Less: Vacancy (5%) = $1,440 

Less: Taxes = $2,800

Less: Insurance = $1,200

Less: Maintenance (5%) = $1,440

Total Operating Expenses = $6,880

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Gross Income less Operating Expenses = Net Operating Income

NOI = $28,800 - $6,880 = $21,920

Cap Rate Overall = NOI / Sales Price ($21,920 / $280,000) = 0.078 or 7.8% Cap Rate

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Notes: Actual taxes are closer to $2,000 I changed it to $2,800 based on sales price which is closer to what it will be for the new owner. Vacancy is hard to measure I used 5% but would like to know what you all think. Insurance is based on actual current owner expense. Utilities are on tenants. Garbage is on owner currently but new owner can add garbage charge to tenants or raise rents by $40 each. 

Based on a 7.8% cap rate for a 4-Plex in Fresno, CA what do you all think?

[Jay Orlauski]

If you are looking to base it on a sales price.. then if you add in management (@10%) it brings you to 6.7% cap rate - I always like to include management as an expense because not everyone manages their own properties - especially those who already have a large portfolio. 5% is a good vacancy number to use - I think that was last number reported by the census bureau  

still a good cap rate for Fresno assuming you don't have too much deferred maintenance. 

Are you offering this for sale ?