First Deal Second Opinion, Cincinnati, Quad

[Nick Howard]

Hello BP,

Long time lurker, looking for my first property, aiming for a live in multifamily. We’ll live in for the first few years, hopefully having $1,000 per month from having no rent.

I’m a bit long winded, so I apologize ahead of time.

My wife and I are going on a second visit to a property here in a small village on the border of Cincinnati.  AreaVibes lists this village as a 77 Livability (Extremely Liveable) and a A- on Crime.  Last week we saw the one of the four units (supposedly the “worst unit” which only appears outdated). The other 3 have supposedly been remodeled (the one that hasn’t has an 8 year tenant in it). What I really like is the owner has just installed new water heaters, new AC, new windows, new concrete parking lot adding 7 offstreet parking (in addition to the attached 2x 2 car garages), and “newer” breaker box and furnaces. I feel like these improvements could really help my wife and I create a strong foundation, hopefully limiting the number of early Cap Ex, lets us build some reserves.

Unit 1 (3:2): $900

Unit 2 (2:2): $650

Unit 3 (2:2): $550 (assuming the unremodeled one)

Unit 4 (Eff): $325

Laundry: $80

Gross Inc: $2,505

10% Vacancy: $250.50

10% Repairs: $250.50

10% Cap Ex: $250.50

10% Property Management: $250.50

Taxes: $304.58 ($3,655 LY)

Insurance: $100 (no quote yet)

Expenses: $1,406.58

NOI: $1,098.42

I’m also currently assuming I can move the cost of water from the owner to the tenants via some simple sqft ratio or even one of these remote hookup things (haven’t researched that too much yet). (Tenants pay electric and gas already)

Will likely need some landscaping, and snow removal? Unsure if that’s built into some property management. Haven’t looked into Property Management yet since we’ll be living in and getting our feet wet the first couple years.

So here's my dilemma. Asking price is $189.9k at asking, it gets $46/door, CoC 10%. My original goals after all the information I've consumed is to aim for $100-$200 per door. To get $100/door, my MAO is 33% off, $146k. I don't think that's in the realm of possibilities. 10% seems more realistic but still maybe not (since I have no experience in buying multis in Cincinnati in 2017). 10% off, MAO is $170k, units cash flow $69/door (17% CoC).

The last scenario is rent increases and value-adds. There is a neighbor I've seen list a 1:1 (900sqft) for $650, indicating my 2:2 may have room for improvement, let's say $665 for both (would need to remodel the older unit, +$15 & +$115). There are 8 efficiencies across the street renting for $450. Not sure if they're bigger or nicer than the 4th unit in this property, but let's say I can get the efficiency to $375 (+$50). I could also try and rent the garages. I think a modest price would be $25/2car/mo (+$50). So the NOI is now (+$15+$115+$50+$50=) $2,735. That brings the $/door to $104, CoC 25%, with the same MAO of $170k. Again, not sure if this is realistic, or if I'm trying to make an okay deal into a great deal by messing with numbers.

Tags: Cincinnati, Multifamily, Quad, First Deal, Deal Analysis