What would you pay for this fourplex?

[Shawn Culhane]

2007 model fourplex near Austin TX
3700sf total, all 2bed/2bath units,2 stories, carports
2.85% taxes
HOA $360/mo (community center and pool, workout room, etc)
2 units currently rented for 859 and 979, other two should be about 859 as well (979 unit is partially furnished)
Very nice area, desirable location (schools, employers, etc)
$0 needed in repairs

What is the max price you are willing to pay? Lets assume 20% down.

[Jon Holdman]

OK, start with $859 rent per unit. Renting furniture for $120 a month is a separate business. Taxes in TX are high, and bugs are a problem, but you don't have heating problems or the damage inflicted by harsh winters. Assuming tentants pay all utilities, you should be close to the 50% rule.

OTOH, it sounds like a condo, so HOA fees are always a wild card. Personally, I loathe HOAs. Even when I lived in Houston for many years, which is rife with HOAs, I always avoided them.

So, here's my math:

Rent: $3436
Expenses: $1718 (includes vacancy and capital)
NOI: $1718
Desired cash flow: $400
Left for payment: $1318
Max loan (and price): $219,831.35 (assumes 30 years at 7%)

That's ignoring the down payment. Really, that's another way of saying you're making the same return on the down payment as you're paying on the loan. (If you're willing to invest your cash for zero return, PM me, I'll be glad to help you out. :-))

So, if we put in the down payment of 20%

Down: $43,955.27
Loan: $175,865.08
Actual payment: $1054.40
Cash flow: $663.60/month
Cash flow: $7963.20/year
Cash on cash return: 18%

Looks like the right price to me.

So, tell us, what are they asking?