12 Unit Multi-Family - What are the things to consider?

[Michelle Shriver]

The seller is asking $749,000 for this property, the tax assessor has it at $627,100,  I've analyzed it at $600,000.  It needs some exterior work, and what appears to be a minimal amount of interior work.  I've only been in 4 units, of course I'd need to see all 12 and have the appropriate inspections.

Though I've analyzed it as a cash deal, I would get financing for it, 65-75% of the price up to 7.5% interest rate, though hopefully lower.  

I don't think it will appreciate much, my primary interest has been cash flow which I don't think I'll get much of after financing.

Any thoughts or additional things I should consider I would love to hear!

Monthly Income: Monthly Expenses:	Monthly Cash Flow: Pro Forma Cap Rate:
$12,833.00            $8,050.05	$4,782.95                    9.15%
NOI Total Cash Needed	Cash on Cash ROI Purchase Cap Rate
$57,395.44            $638,400.00	8.99%                           9.57%

Property Information

Purchase Price:  $600,000 

Estimated Repair Costs:  $30,000 

Total Cost of Project:  $630,000

After Repair Value:  ??  

Property Description:  12 - 3 bedroom 1 1/2 bath, Section 8

Rent Total:  $12,833.00

Vacancy - $1,283.30 (10%)

Repairs - $1,026.64 (8%)

CapEx - $1,026.64 (8%)

Water & Sewer - $355.00 (3%)

Electricity - $180.00 (1%)

Garbage - $210.00 (2%)

Insurance - $1,208.00 (9%)

Property Taxes - $805.17 (6%)

Flood Insurance - $447.00 (3%)

Lawn - $150.00 (1%)

Termite Contract - $75.00 (1%)

Management - $1,283.30 (10%) 

Total - $8,050.05 (63%)

[Jonathan R McLaughlin]

make sure you run the taxes based on the new purchase price/new assessment not the current rate

insurance seems low, is that a quote? You want lots of liability (umbrella)

How is the upside on the rents? parking? etc.

Is the 30K an actual item or just an estimate. If, say, its the roof, be prepared for peeling it off and finding more than you bargained for, etc. I might add on a good chunk of reserves for something like this in addition to the accounted for expenses

lead certificates?

I think you are likely low on repairs

Flood insurance? Oy, do check the updated fema maps and make sure you aren't about to get whacked with a change in risk.

good luck!