Estimating ARV for 2-4plexes & deal analysis

[James T.]

Hi everyone,

My name is Jimmy and I'm a recently new member and Pro member! I've been listening to the BP podcast and BP Money podcast for months and reading many of the books recommended on the show. I love learning and can't get enough! I've been lurking on the forums for a little while absorbing as much info as I can. This community is great! My fiancée and I are just starting out with REI and have been looking to house hack a 2-4 unit multifamily. We found a 4 unit recently and are hoping to get some feedback from the BP community on this analysis. We both have strong W-2 jobs, have pre-qualified for strong financing, and will live in one of these units.

Here’s how I’m looking at this, Open to any and all feedback!

• 4 unit x 2bd/2ba. 950 sq/ft each. Listing price: $1,150,000
  • Renovated comps go for $1900-$2400 in the area. The higher ends are full houses or apts with amenities
  • Property is located within blocks of a Cal State University so rental demand may be consistent
• COC ROI is fairly low, but I'm comfortable getting a ~5% return on my first deal if it means that this is a learning experience. Also, through normal economic cycles—I would think a stock market correction may be naturally occurring in 12-18 months so I can accept a modest return
• I only have exterior pictures of the property which shows it as "fine/livable". The reason I estimate $120k in repairs is because I want to increase the ARV and increase rents, which brings me to my next point:
  • A 4-unit renovated comp with the exact same specs showed up on the MLS today for ~$1,600,000! It was very nicely renovated inside with laminate hardwood and tile with nice new paint.
• Even if the COC ROI is low, it still cash flows okay and most importantly, I can use the BRRR method to pull money out after the forced appreciation and move onto my next deal.
• 20% down + cost for a renovation would tap us out completely. I know we want to leave room for an emergency budget, which is why I'm looking into leveraging an FHA/203k loan to assist with the renovations.
• Also, we're a bit lost when it comes to estimating ARV for these small multifamily units. Any insight or resources would be fantastic!

Vacancy: 4%

Repairs and Capex are low because I plan to put $120k into it