What am I missing on this deal?

[Greg Devlin]

Purchase price is 279k in the northeast. Not in a major city. It seems like a good deal but wondering why it has been on the market for so long(6+ months)                                                       Current  Income and 2017 Expenses 1st floor front      $975.00 1st floor rear        $750.00                2nd floor front      $600.00 2nd floor rear       $700.00 3rd floor front      $950.00 3rd floor rear        $700.00 4th floor front      $900.00 4th floor rear        $600.00 Hot water is included in the rent for all units Heat is included for units 1st & 3rd floor front and 3rd  floor front Expenses for 2017 Water & Sewer    $10,957.52 Gas & Electric       $6,733.05 Repairs                  $1,125.00     RE Taxes                $2,731.76 Insurance              $3,871.00 Trash Removal     $2,226.96

[Tom Shallcross]

Hi @Greg Devlin - thanks for sharing.  Obviously there is more than just the spreadsheet numbers that go into the deal, so just want to call that our so your not overlooking the other attributes that can make/break a good deal.  Please then take it one step further to make sure the end result aligns with the personal goals you have set forward. Lastly, ensure you get actuals for the numbers above to validate....

Now that my disclaimer is out of the way :), I've provided my cashflow analysis below.  You can use the BP calculators to run these numbers, but below is my quick summary on how I would evaluate the numbers (and correct me if I incorrectly input any of your data):

6,175 - Monthly Rent 

(1,499) - Monthly Debt which is rough guess of 75% LTV on 20yr commercial term

(432) 7% Vacancy 

(494) 8% Property Management 

(235) Monthly Property Taxes

(325) Monthly Insurance 

(925) Water

(250) Landscaping/Snow - I added 

(550) Heat/Gas

(185) Trash 

(100) Repairs

(308) 5% Cap EX

872 Monthly CF

So you're at roughly $100/door and this assumes you don't need to make any upfront renovation to the property (which I would assume you do need to do something). There is a lot more that goes into the equation. If you have a gameplan to decrease expenses, have tenants pay for some of these expenses, or raise rents, your CF and NOI numbers can look much better. At the current purchase price, the CAP Rate is coming out rather high - roughly 9%-11% depending on how you evaluate expenses - which you'd need to compare with other multi's in the area to see if inline. Cash-on-Cash is high as well if running numbers of 25% Down payment.

Long-story-short: If 100/door aligns with your expectations/goals, it works with these conservative numbers. Expenses seem high and if there is a way to meter water and make tenants pay (and check if that is norm in the area) or knock out some of these larger expenses, numbers work much better. If you have some sort of value-add strategy to make increase NOI, go for it but I don't see this as a turn-key purchase.