All Forum Posts by: Evan Webber

Also, the way utilities are charged for each location is generally the same except for water. The landlord pays for garbage and also water/gas for the common areas. There are 2 washer/dryers per property and they are shared between 2 units. The other property is the same, except water is paid by the landlord. They are individually metered, so my plan would be to have the tenants pay for the water going forward and just pay for the washer/dryer area.

Thanks for the input. I wasn't sure where to put the CapEx number. As for management fees, snow removal, etc. I will be managing the property myself and taking care of those items, so although it will cost me time, I won't be paying anyone else for the services. The price I have budgeted is where I believe I can purchase the property from him based on conversations with the realtor. The actual asking price for the properties is upwards of $270k. The issue is because I am purchasing in a small rural area, there isn't any true comparables or recent sales of comparable properties. I believe this is a unique scenario with the low rent, because the landlord is the original owner and built these units himself. He doesn't owe anything on the units and hasn't actually raised rent since the early 2000s. Comparable units (even smaller units) rent for around 500 in the area though, which leads me to believe that I will be able to raise rent without tenancy issues, but I have used $400 to be conservative.

So I have been thinking about jumping into REI recently, and I have a partner and my eye on a property (well actually two, but they come as a pair). Both properties are 4 unit multifamily apartments with 2 beds and 1 bath and 1100 sq. ft per apartment. My area is a small rural community in Central Illinois. The apartments currently rent for $400/unit, but with the quality and size of the apartments, I plan on raising rent to $450-$500 for new tenants. The current owner built these apartments in the 80s and no longer has the ability to maintain them and run the business and is looking to get out.

This is my first real estate analysis, so I am looking for variables that I may have missed, or if my assumptions are false.

Mortgage - $716 ($175k purchase price)

Insurance - $515

Property Taxes - $200 

Vacancy - $226 (7%)

Maintenance - $165 (5%)

CapEx - $160 (5%)

Gas/Electric - $176

Water - $60

Garbage - $130

Income Taxes - $432 (this is using deductions for interest, depreciation, maintenance, travel, property taxes, and insurance) 

This leaves me with a positive cash flow of $457 using the current $400 rent price, so it would leave me some wiggle room for raising rent. Me and my partner would maintain the units ourselves.

I appreciate any insight anyone can offer for a first time buyer and landlord, and feel free to let me know if I am off base on any of my calculations or assumptions.