Need help analyzing multi family deal

[Jamie Gruber]

I own two duplexes and a single family but am looking at an off market 8 unit and analyzing multi family is a bit new. Any advice would be more than welcome. This is just an initial analysis. I’ve seen the property, talked to the owner and received his rent roll and expenses. Due diligence will come later if I can get this under contract. Asking $520k Indicating $80k in rent and $20k in expenses. Only 25% and the owner pays for all utilities. The property needs some work so expenses seem very low, especially considering utilities. Based on an asking of $520k and $60k NOI, he’s selling at an 11.6% cap rate. The expense itemization is missing some key items: - management - lawn care and snow removal - maintenance costs It only lists taxes insurance and utilities. I’m considering $10k in management (10% of rents plus 25% turnover annually), $2500 annually in lawn care and snow, $5000 annually in maintenance and repairs. This increases expenses to about 46% and decreases NOI to $42500. Based on an 11.6% cap rate, I’m looking at a value of $366k. Again, I would then need to get a sense of actual income, actual expenses, inspection of the property, better idea of rent potential, etc. Is this a fair way to assess a multi family? What else should I consider that I’m not at this point? Thanks!

[Alex Deacon]

@Jamie Gruber I think you are going through the correct process. Dont believe what the owner tells you as far as what the rents could be and it sounds like he or she is very light on the expenses. If its a quality building then anything near double digits is exceptional but you have to make sure you are accounting for all expenses. Turnover. Are the units dated. if so turnover expense will be high. Are all the tenant paying. Are you going to have to evict 2 of them from day one. Good luck to you.