Deal Analysis- Are my Numbers Right? Is this a Deal?

[Nick Troutman]

I have been running numbers on a double duplex (4 units) and I think I have it correct in my spreadsheet, though would someone mind looking at the numbers with fresh eyes to see if I forgot something, or did any of the math wrong. Is this a deal?

[Trent Stone]

The numbers look decent to me. I think the cashflow per door is a little low for that area. Also, make sure that you get actual data from brokers and PMs, don't ever trust the seller proforma. Also, look at the P&L from the last 12-24 months from the seller, compare bank records, rent rolls and receipts, etc. and see in in the worst month it was still a good investment. Be mindful of deferred maintenance or any other big ticket items that may be coming due that might not have shown on the seller's P&L. Also, be aware of the cap rate for that asset class in that type of neighborhood. If this property is in a D class hood, then you should run, if it's an A class, then you might be alright....Just make sure you do your due diligence and VERIFY. The seller will have to provide all records during the seller's disclosure period, you might as well ask for them now before you waste each other's time.

[Nick Troutman]

@Trent Stone thanks. As for bank rolls and receipts do I just ask for them. I was given the P/L but it didn't even have mortgage or insurance in the expenses or NOI. I'll check on class of neighborhood as well. Thanks.

[Trent Stone]

Yup! He better have taxes, receipts, bank records, leases, etc. to prove everything he is telling you. You would not believe how many "p&l's" I have see thrown together in 5 minutes with excel. If he wants you to believe it, he better be able to prove it. "Trust but verify". You can also talk to PM's who work the area and ask them what expense ratios are for that specific area. ie. all your operating expenses (does not include financing costs) should add up 40%. I'm not an expert in markets in the south, but I would imagine your expense ratios would be pretty low. I imagine somewhere in the 35-40% range, but don't quote me on that.  

[Nick Troutman]

@Trent Stone thanks again! I’ll get the fact from him. On a total side note, what are your personal thoughts on putting in offers/ investing right now? I know offers are free, but I want to pull the trigger if the deal is good enough. Should I be waiting a bit to see what happens first or just keep on going if the numbers work? Thanks again for your time and help. 

[Trent Stone]

I think it's a great time to invest. It's always the same, people who invest in real estate find ways, people who don't find excuses. The Fed dropped the interest rates to 0% and they are going to dump over a trillion dollars into the economy soon. If anything I think it helps you. Your seller might be fearful so you can use that to negotiate a lower price, and buyers are fearful so you have less competition. But no doubt the world will keep turning, the economy will come back, and people will always need a place to live.