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Updated over 7 years ago on . Most recent reply
First Deal - 4plex in a college town
Hello everyone,
I’ve analyzed several deals over the past 2 or 3 weeks and finally have come across one I think might be a winner. It’s a 4-plex in a nearby college-town. The house is about as far from the university as you can get while still being in the town (about a 1 mile/20 minute walk). Asking price is $179,900, and supposed rent is $650/month for two of the units (2 bed), $675/month for the other two (3 bed). This property also comes with a 2 unit garage. It was built in 1940 and has been on the market for 131 days. Owner paid water and heat from what I can tell off the listing sheet. Would also have to include lawn care (small yard) and snow removal (side walk).
Asking: $179,900
Projected closing cost (provided by lender): $8,000
Down payment (20%): $35,980
Monthlies:
Mortgage (30 yr fixed rate at 4.75%): $751/mo
Vacancy (5%): $132.50
Maintenance (10%): $265
Insurance (their number): $158.75
Property Tax: $304.17
Utilities (complete guess at this time, $2500/yr): $208.33
Management (don’t plan to use): $265
Cap Ex (10%): $265
Contingency (5% added to all expenses)
Total Monthly Expenses: $2467
Rent Income: $2650
Monthly Cash Flow: $183
CoC ROI: 5%
NOI: $2196
Unknowns:
Rent (numbers provided by listing agent, will need to verify 100%)
Utilities
Insurance (probably won’t change enormously, though)
The reason the seller is selling
Notes: To me my estimates seem conservative (which I always aim for). With a perfect situation (ie removing management fees and the 5% contingency), I end up with over $550/mo in cash flow. This says to me that, even in the event of a miscalculation I’ll still cash flow decently. Am I missing anything crazy? I think I might even be able to get a slightly better deal on this place, solely because it’s been listed for over 4 months. I have not visited the property yet, but barring any crazy notes from the listing agent, I will likely set up an appointment in the next week or so. Let me know your thoughts.
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![Stephen Dickey's profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/200526/1621432768-avatar-dickeys3.jpg?twic=v1/output=image/cover=128x128&v=2)
Your projection for cash flow seems low, a lot of expenses. If you remove the management fees, it opens it up a little more. Definitely look into how you could minimally improve the property to raise the rent rates, say $25-$50 per month, which would help raise the number.
What is the market value of the property? Is it listed at full price?