16 unit apartment deal analysis

[Alexandra R.]

Price $294,000
20% down = $58,000
Annual Mortgage = $16,000. (4.25 for 30 years)
Annual rent = $81,600
Estimated annual expenses = $8,500

NOI = $56,500

Not sure how much to keep for repairs ? Could you help with that too?

I have a 3% vacancy

I have a 19% cap ?

Can someone let me know what they think on this deal or what I should add?

[Joel Owens]

The numbers always look good on paper.

Then you analyze and find out the numbers are off.Now what is left is finance options with the real numbers and if the seller is realistic or not.

A four plex has it's own issues.

Buying a larger complex can be okay for your first one if you purchase correctly.If purchased wrongly it can take down your other positive investments just to keep it afloat.

5 units up to about 20 units someone can self manage but it gets really hard.Larger size properties it's easier to have a full time PM company in place where that's all they do.

If you are buying in a less desirable part of town for more cash flow usually the more intense management and unit turnover rate will eat into the perceived extra cash flow gains.

Nicer areas with better demographics will have more lenders lining up to give you great loan terms over suspect areas which present more risk of the area going really bad for the lender.

If an area tilts from okay to bad now the lender is taking on a foreclosure for a huge loss on the loan.