[Calc Review] Help me analyze this deal

[Billy Sarno]

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Please tell me what you think. This would be my first investment property. I'm interested in a multi-family unit. I found this four-flex in Omaha. I would put down 20%. They are asking $110,000. I would offer $80,000 or $90,000. I would put $30,000 into it. The area is getting at least $600/unit. I built my projections on $600/unit, renting out all 4 units, which totals $2400/month. This house is pretty close to the new up and coming area called, "Midtown."

It's also close to U of Nebreska medical school (please forgive me if I've missed the exact name.)

Thoughts?

Thanks,

Billy

[Richie Thomas]

Hey @Billy Sarno, I'm only an aspiring investor (not an experienced one by any means).  So take what I say with a grain of salt.

The price-per-square-foot looks decent, these are the PPSQ comps from PropertyShark:

By comparison, PropertyShark says this is a 3,395 sq ft property, making it $32.40/sq ft.

Make sure you're aware of what kind of neighborhood this property is located in.  Here's the NeighbrhoodScout.com crime map, side-by-side with the Google Maps pinpoint of this property's address.  You can see it's... deep purple:

You know your farm area better than I do, but keep in mind that with a D or C-class area, you'll want to factor in higher repairs + capex rates, as well as higher vacancy rates (due to the likelihood of more frequent non-payment of rent and evictions you'll face.  Make sure you budget a few extra % points for a property manager who has seen it all before, so that job won't fall on you.  You'll need to at least double your current 5% budget to 10%, likely 12% to be safe.  Some PMs won't take on D-class properties no matter how much you offer them.

Your property insurance might actually be high.  Realtor.com's listing is telling me $50/month, not $150/month as per your analysis.

Repairs + CapEx are 10% right now. This property was built in 1890, so you may want to double those.

You mentioned this is a 4-plex, but you didn't mention how many bedrooms are in each unit, and neither does the MLS listing. I *think* $600/unit is fair given what Rentometer is telling me, but I'll defer to you if this is your backyard. Talk to a competent property manager about what they think they could take down for this neighborhood:

5.0% might be a *bit* low for a non-owner-occupied loan.  I have 780 credit and I've been quoted 5.8% for a 30-year fixed, for my first property.  That's with a point or two on top.

Speaking of which, this property looks to need significant work.  I really want this to work for you but the amount of rehab required gives me cause for concern.  Have you considered partnering with a more seasoned investor for this property?  A financial base hit on this property wouldn't be so bad if you could learn-by-observation from a seasoned vet.