All Forum Posts by: Rick L.

In the process of evaluating 6+ unit multifamily properties, I've come to the conclusion that these properties are either EXTREMELY over priced, or my estimates for expenses are too aggressive. In many cases, I'm able to attain the gross income, NOI, utility, tax, insurance and repairs/maintenance expenses from the seller. However, I prefer to use my own data for such items as: insurance, repairs/maintenance, capital ex, vacancy, property management, etc. Using Google search and speaking with local bankers/investors, I'm able to attain studies that provide the St. Louis market's average vacancy rates and Cap Rates. However, I'm really struggling to figure out a good number or range to use for Cap Ex and Repairs/Maintenance. I'm currently using 5% for Cap Ex, 10% for Repairs/Maintenance, Vacancy 7%, and Property Management 10% plus whatever tax and utility expenses are listed. Unfortunately, I'm beginning to doubt that these are appropriate estimates since most of the offer prices I determine to be fair, based on a Cap Rate of 8-10%, are primarily 30-50% lower than asking price.

What do you use for your Cap Ex, Repairs/Maintenance, and Vacancy expense estimates???

I'm running into the same problems here. Seller's appear to have this inflated idea that claiming gross rent minus utilities and other minor expenses provides a NOI. However, they're forgetting unforeseen expenses like, vacancies, capital expenditures, repairs & maintenance, etc.

I've recently been told the United States Census Bureau displays average expenses from property owners and managers. I'm attempting to locate this information in the Property Owners and Manager's Survey (POMS).

http://www.census.gov/housing/poms/

If I'm able to attain hard data for the POMS to justify my expense estimates perhaps it may be easier to re-educate sellers and justify my lower offer prices.

Here's a screenshot of what I'm trying to accomplish. The top table represents inflation and yearly rental increases.

The expenses table has all expected expenses listed with Vacancies, Capital Expenditures, Maint. & Repairs, and Property Management listed so you may enter them as an adjustable percentage or exact cost.

The remaining tables are the same as J Scott's, however, my new changes have thrown the majority of the Excel formula calculations off.

Hello BP,

I'm attempting to modify J. Scott's single family rental analysis spreadsheet located in the FilePlace to be better suited for multifamilies. I've added, what I believe to be, all the pertinent categories for a multifamily deal analysis. With my limited knowledge of Microsoft Excel, I've attempted to correct the excel formulas. However, many formulas are still incorrect. Would anyone be willing to collaborate and assist me in modifying the spreadsheet. I plan on posting it to the FilePlace when it's complete to benefit the BP community.

I can relate. I'm a health care professional and earn pretty good income. I paid a one time fee for tp lawyer to become my registered agent. The fee was basically the time for his paralegal to draw up the documents and for him to sign them. For my second LLC I recently establish, I drew the documents up myself and requested his signature. I save about $200 dollars doing that.

Thanks for the responses. Just to follow up...I spoke with a commercial bank lender I'm working with who was able to provide me with more than enough information over the phone. I would definetly recommend others who are interested in learning more about Cap rates for their areas to do so as well.

The property is a four family with some updated electrical and plumbing. The neighborhood is C rated area. I attempted to run a few quick numbers based off of statistical data and current rents. I would greatly appreciate your opinion.

Asking Price: $52,000

Purchase Price: $41,000

Gross Monthly Rent: $1800

Estimated Monthly NOI: $720 ($1800 x 40%)

P&I: -$220 (20yr term @ 5% with No down payment)

$100 Profit/unit: -$400

______________________________________

Net Profit: +$100

Estimated Monthly Expenses: $1080 ($1800 x 60%)

Insurance -$150

Sewer -$60

Taxes -$50

Trash -$60

Water -$50

Lawn/Snow Care -$50

Property Management -$180 ($1800 x 10%)

Capital Improvements -$180 ($1800 x 10%)

Repairs/Maintenance -$270 ($1800 x 15%)

Vacancy - $216 ($1800 x 12%)

____________________________________________________

Net Profit -$186

I'm not quite sure if If my percentages of expenses (Repairs/Maintainance, Vacancy, Capital Improvements) are correct since I detailed the utilities. With my current numbers, I'm not sure this property cash flows?

I'm actively searching to purchase a 10+ unit residential property. I'm struggling to determine what acceptable CAP rates (CAP Rate= NOI/Purchase Price) are for particular areas. I realize that CAP rates vary considerable across the country. In New York or Chicago an investor may consider an acceptable cap rate to be 4-8%, but what about smaller markets. Or different neighborhoods or areas within a city.

For instance, I'm struggling to determine appropriate CAP rates for A, B, C class neighborhoods within areas of my local market of St. Louis. Do I need to talk to bankers or appraisers to gain this knowledge?

Thanks Joe, great info!

@Joseph Weisenbloom @Bill Jacobsen