5 Unit GA Property Analysis

[Eric Bentley]

Hello everyone! Hope everyone is staying safe! I'm a new investor in Georgia and I'm new to the BP forums. I have a property analysis here for a 5-unit apartment building in GA that I was hoping to get a review on to discuss ways I can improve.

This 5-unit is currently listed at $350k with $2,750 per month in current total rents, with room to increase those down the line. Based on my research, the current owning entity paid $206k in May of 2020 and I was unable to find any info on them rehabbing the property but it is in very good shape for the area. Because of their original purchase price, there may be some room for negotiation but just by these numbers so far without calculating the increase in rents, the profit and returns are pretty good.

Please let me know what you think. Thank you,

-Eric

https://www.biggerpockets.com/...

[John Cassel]

@Eric Bentley as others said above, with a quick adjustment to a commercial loan 20 year and upping rate to 4.5% this goes to negative cash flow pretty quickly.  With out a decent bump to income through improving rents this is likely not to be a good cash flow play. 

Building on what @Tim Herman said, in my opinion a good starting point for smaller MFs such as this one is 10% Mgmt, 10% Maint, & 10% CapEx. The CapEx and Maint could go lower if the property is in good shape or is newer but it is a safe measurement when quickly looking at deals. I usually use a vacancy of 8-10% as well. If I buy the property to do a lot of renovations I will even factor in a higher vacancy rate the first year or two if I expect a lot of turnover.

Hope this helps!

John