I am looking to buy a 4 plex in the Phoenix metropolitan area (Glendale) and I just wanted to share a little bit of the math I did and see if the members here could help me decide if it is a good deal.
I created a spreadsheet to help me analyze deals, but I might be missing something.
|
Price
|
Dwn Pymt
|
Clsing Costs
|
Cash Dwn
|
2nd Loan
|
Units
|
$ Per Unit
|
Avg Rent
|
Gross Inc.
|
Other
|
Adjusted gross income
|
Vcny Lss
|
1 Mth Mortgage
|
1 yr mortgage
|
2nd Loan pymt.
|
Taxes
|
Ins.
|
Mgmt
|
Maint. / repairs
|
Water / utilities
|
Operating expenses
|
NOI
|
CAP
|
Monthly income
|
Occupancy
|
cash on cash return
|
|
$144,000
|
$0
|
$4,744
|
$148,744
|
$0
|
4
|
$36,000
|
$513
|
$24,600
|
$0
|
$22,140
|
$2,460
|
$0
|
$0
|
$0
|
$1,050
|
$780
|
$0
|
$2,000
|
$2,642
|
$6,472
|
$15,668
|
10.88%
|
$1,306
|
fully rented
|
|
$137,000
|
$34,250
|
$4,680
|
$33,000
|
$5,930
|
4
|
$34,250
|
$475
|
$22,800
|
$0
|
$19,380
|
$3,420
|
$552
|
$6,621
|
$1,258
|
$1,050
|
$780
|
$1,454
|
$2,000
|
$2,642
|
$7,926
|
$11,455
|
8.36%
|
$298
|
fully rented
|
The first line is all of the information that they had listed on the MLS. They had vacancy loss at 10%. Pro forma average rents of $512.50
The second line is my offer price and what the investment looks like to me at that price. Down payment is 25%. Closing costs were calculated using an online calculator. I only have $33,000 cash to use, so I would have to take a second loan of nearly $6000, repaid over 5 years at 2.25% interest (secured loan), to cover the rest. Mortgage is calculated using 5% interest on a 30 year fixed rate mortgage. I did a rental comparison of the area, because they don't have actual rent rolls, and I estimated that the average rent would be $475 a month. I calculated vacancy loss at 15%. The property manager I am using charges 7.5% of the rental income. Tax and insurance info are from the pro forma. I usually budget 10% of rental income for maintenance/repairs/supplies, but the number on the pro forma was higher, so I used it. I budgeted $55/month per unit for water costs, which was about exactly what the pro forma had budgeted for water, so I used their numbers. My cash on cash return using these numbers would be 10.83%.
Should I be looking to get a higher cash on cash return? Am I underestimating spending in any areas? Help me if you can, this may be my very first deal.
