Multi-Family Property Analysis

[Matt T.]

I am on the verge (within a year) of doing my first real estate deal. I am not ready to jump in yet, but I am testing my brain while crunching numbers on potential deals. Here is one I came across on LoopNet -

http://www.loopnet.com/Listing/6220-E-11th-St-Indianapolis-IN/10942445/

I have driven by the location and it is on the northern border of a well established neighborhood on the near east side of Indianapolis. It is not a great location, but I think it will hold its value and not depreciate.

I am convinced that the listing is right when they say it will take $300k in repairs to get it going again. The buildings are nice brick exteriors with interior common areas. Everything is rough, but I think 75% of the work will be in finishes and windows.

With a $645k purchase price (with 25% down) and $300k rehab cost (cash), my spreadsheet is telling me I will have a cashflow of 124k with a CAP rate of 24% and Cash on Cash of 27%.

What am I missing? What would this place be worth if I try to sell it? With a CAP rate of 9%, I think this thing should be worth about 1.5M.