All Forum Posts by: Chad Workizer

If I get this property appraised and it comes back at 200k for example. Am I still expected to put down 25 percent of the purchase price or can I use some of the equity from the different in purchase price vs appraisal. In my experience with the SFH I've purchased the appraisal usual doesn't vary much from the purchase price I have no idea if that can be said for commercial investments. Anyone's insight would be appreciated.

Also, please excuse my ignorance, but I'm running these numbers through the calculators provided on this site and coming up with making about 9-10k a year. With putting 25% down, a little over 40k, I'm showing cash on cash return at over 20% and a cap rate of 10%

Joel,

Thank you for the detailed response. Can you break out the 35% operating costs. Is this all general maintenance and repairs, lawn care, utilities paid on vacant units etc? Am I missing something. When I run through the calculator I must be grossly underestimating some of my expenses.

First off I need some help understanding financing on a 5 plex. I've read that I can't do a convention 30 year fixed on property with over 4 units? If I can't what options do I have and how much higher are the interest rates?

Here are the numbers

PP: 170,000
Taxes: 1100
Insurance: 700
Rent per unit: 400
Year build: 1994
In good repair.
4/5 units currently rented
Tenants pay everything except trash

I was running calculators based on being able to get a conventional loan and was coming up with 900 dollars with taxes and insurance. I figured 80 percent occupancy which would mean always a vacant unit. So monthly income at 1600. After expenses I was figuring it to cash flow 400+ dollars a month. I have zero experience with 5 something like this so any advice would be appreciated.

I plan on managing the property myself.

Thanks
Chad

I appreciate everyone's feedback on this deal.

Harry, I did check comps and it sounds like 650 is low for the area. Most other 3/2/2 were renting starting at 750.

William, I have a few war zone single homes. I'm looking at real estate like stocks and I'm wanting to diversify with some nicer units. In 20-30 years I don't want to be stuck with a bunch of slum properties. I'd like to have a few nice ones to sell as well. Maybe I'm looking at it wrong.

CF, I called my banker and you are correct on the 25% down. The numbers I ran through the different tools I found on here came up with a similar Cap rate as to what you stated which didn't seem to bad for a less than 10 year old property in a nice area.

Here are the details of the purchase.

Asking price 155,000 year built 2006
3/2/2 with 1250 sq ft each side
rent 650 each side -
last years taxes 1600
insurance I'm going to estimate around 600/yr

I have 20 percent to put down. I'm thinking if I can pick this up for 140,000. It will be a decent property. I called around and checked rental rates and low to average for a 3/2/2 duplex of that size. Rental environment in this area is decent with several small colleges and hospitals.

Any advice or thoughts would be appreciated.