[Calc Review] Help me analyze this 4 Plex ( first time use)

[Dean Dutro]

View report

*This link comes directly from our calculators, based on information input by the member who posted.

Hey guys, 

I've started using the BP calculator, and have analyzed a few properties trying to account for as many expenses as I can think of. 

A question I have for you- is when you analyze a property what type of guidelines do you set for it to be considered a good deal?

For example, most of the multi-families I've analyzed in my target area have a Cash on Cash Return of Less than 3% for the first 1-5 years, but then it dramatically increases after year 5 and again at year 10. 

For a 4 plex, what would you be looking to accomplish or use as a framework for a good deal? 

[Robert Leonard]

@Dean Dutro Great questions. As @Brandon Sturgill mentioned, much of "good" is relative. It'll depend on your market and preference. If you're investing in a buy-and-hold rental mainly for appreciation, you can accept lower cash flow and initial cash on cash ROI, but if you're investing for cash flow, that's a different story.

For me PERSONALLY, I am an investor focused on buy-and-hold multifamily rentals with strong cash flow. I consider appreciation to be a nice "side-effect", but I do not depend on it. I look for properties that would be good deals even if the property value remained relatively stagnant. 

That being said, in my market, New Hampshire and Massachusetts, I won't even consider a property if it isn't cash flowing AT LEAST $150 per month per unit. That's my absolute minimum to even look at the property. I most likely wouldn't invest in any properties cash flowing less than $200 per month per unit, but $250 per month per unit is my ideal threshold. 

For cash on cash return, my ideal target is 30% per year. This has become more difficult to find given lofty property valuations and our current position in the market cycle, but that is my ideal target. 

These numbers are what they are because I focus on cash flow, not appreciation. If appreciation is a variable in your equation, the cash flow per month per unit and cash on cash ROI can be a bit lower.