All Forum Posts by: Sam Y.

Thanks Kevin!

I am new at this. Can someone help explain what @Mathew King means by at 12% and 10% Cap rate. Why is this important? 

Is this the right analysis/thinking?

So Cap Rate = NOI/purchase price. Appraisal appraised at 490K at cap rate of 8.5%, then NOI = 490K * 0.085= $41650 per year. If that area should be at 12% according to Mathew, then NOI should be at $58800 per year. Since Joe checked the actual NOI from seller and it's way below $41650 at 8.5%, so does this mean either the vacancy was too high or something else was wrong? However if that areas cap rate is at 12%, NOI should be at $58000, then why do we care if actual NOI number is low or not? Wouldn't this mean this apartment has the potential to produce at 12% cap rate in that area and can be good deal if other maintenance are assuming OK?

Is this the right analysis? What am I missing?

If there's no large deferred maintenance, looks like pretty good deal I think.  

Income = 600x4 units = 2400 x12 = $28800 annual

Expense = 28800 - (5000 + 2300+1330) = $20170 NOI

20% down of 90K = 18K, borrowing at 72K.

72k at 4% for 30 years = $344 monthly

Annual total mortgage = $4128

Cash flow = NOI - mortgage = 20170-4128 = $16042 a year

Cash on Cash return = CF/(down payment+closing cost) = 16042/18K+ 2K CC = 80%

I didn't add in vacancy rate, property management fee above and general minor repair.  If this location vacancy rate is low thru out the whole year, it will be good deal I think.

Disclaimer: I'm not an expert on this, still learning myself.

Can go to http://www.123flip.com/ and download J Scott's SFH Analysis spreadsheet. I think you need to subscribe to the newsletter first to get the link. This sheet is available somewhere in BP too under J Scott's.

Great story Patrick, thanks for sharing!

Did the unexpected rehab cost missed by the building inspection during escrow?