All Forum Posts by: Chase Leavitt

Yes! Thanks for catching that. 

NOI - mortgage = cash flow

$1,451-1,322 = $129 cash flow

Have you spoke with anyone from FIG yet? They are a town home style fourplex (basically 4 townhouses in a row with one tax ID). I have a couple fourplexes (one in Vineyard and one being built in Eagle Mountain) and have a duplex in Vineyard and I just reserved two more duplexes in Herriman.  Above average cap rate with $1,200 plus cash flow per fourplex. 

Here's what I came up with when doing quick numbers:

Income:

$2,000 a month

$1,322 - mortgage

Expenses:

Taxes $279

Property Management: $160

Insurance: $50

Vacancy - $60 (3%)

HOA - $0

Cleaning and Maintenance - ?

Water - ?

Sewer - ?

Garbage - ?

Exterior Maintenance - ?

Total - $549 a month

NOI = $2,000 - $549 = $1,451 x 12 = $17,412 yearly

Cap Rate = 17,412/$259,900 = 6.69%

Cash flow = 2,000 - $1,322 = $678

I strongly agree with Adam that you have some key "Expenses" that are being left out. See question marks above. At first glance the cap rate look somewhat favorable/above average for the Utah market but I would guess that when you get accurate numbers for cleaning/maintenance, utilities, etc. you will see your cap rate drop a bit. I'm in Utah as well and from what I've seen the average cap rate is 5-5.5%. I've bought and sold numerous "off market" multi units that offer a 6-8-7.2% cap rate. The best part is they are new construction so the cleaning and maintenance typically ends up being 1% or lower for the first 1-3 years. These are the type of properties that really catch my eye. 

I have a software that I can plug these numbers into that will give a clean breakdown of everything along with your long term buy and hold projections. Let me know if you are interested and I can plug everything in along with the numbers we are missing so we can see what the true cap rate is. 

I didn't go through all the comments so sorry if I'm repeating. The real question should be is how do the numbers look? What is your NOI, cap rate and cash flow? Yes, the end purchase price is something to consider but when I look at purchasing an investment property I'm not only considering the purchase price I'm looking for a favorable cap rate and a property that is cash flowing at least $1,500 after "ALL" expenses and mortgage. The average cap for our Utah market is 5-5.5% cap rate and I won't buy anything that's below a 7% cap. Are you seeing a favorable cap rate and cash flow on this property with the offer you submitted and are currently under contract at? If so, it may be worth it to consider paying above appraised value. The low appraisal is just an opportunity to negotiate a better deal to increase a favorable cap rate and cash flow that you should have offered and been under contract at in the first place.

I would definitely consider exploring the mulit-units. That's all I do and it's worked out great/been very profitable. What are you starting to see on the financing side with your 14 single family homes? From my understanding once you get to 10 loans plus it's harder to get favorable terms/conventional financing. 

NOI/purchase price = Cap Rate

$22,000 (NOI which I haven't verified but got from you) / $375,000 = 5.8% cap rate

The biggest question is verifying the expenses to make sure your NOI is correct. Awesome price for an 8-plex from what I'm use to seeing here in Utah. The other thing I would look into is if there's anyway to increase the rents to bring up the NOI. If not, to me and what I'm use to a 5.8% cap is just average, especially for the age of the unit and repairs that will be needed. Just curious, what's the average cap rate you guys are seeing in Wisconsin? Here in Utah average cap is 5-5.5% which those seem to be selling all day long. I wouldn't settle for just average and continue looking for something more than average.