From the BiggerPockets Blog

 BiggerPockets Blog »

Jump to Forum View All

Click a category below to view different forum categories.

BiggerPockets

General Info

BiggerPockets Q&A, Site Questions, & Announcements

1514 topics, 14412 posts — Last Post 04/24/14, 05:53PM

BiggerPockets Exclusive PRO Area

117 topics, 841 posts — Last Post 04/23/14, 08:28AM

New Member Introductions

11000 topics, 86705 posts — Last Post 04/24/14, 09:40PM

Real Estate Success Stories

400 topics, 6221 posts — Last Post 04/24/14, 05:13PM

General Real Estate

General Real Estate

Buying & Selling Real Estate

6006 topics, 47312 posts — Last Post 04/24/14, 08:45PM

Renters

651 topics, 5873 posts — Last Post 04/24/14, 03:20PM

Get Foreclosure Help - Help Stop Foreclosure Forum

317 topics, 2561 posts — Last Post 04/23/14, 08:28PM

Home Owner Association (HOA) Issues & Problems Forum

238 topics, 1611 posts — Last Post 04/23/14, 04:02AM

Do it Yourself

660 topics, 6334 posts — Last Post 04/24/14, 08:31PM

Reviews & Feedback

Real Estate Deal Analysis and Advice

3718 topics, 29817 posts — Last Post 04/24/14, 09:08PM

Real Estate Guru, Book & Course Reviews and Discussions

1140 topics, 11616 posts — Last Post 04/24/14, 08:58PM

Ask About A Real Estate Company

743 topics, 7348 posts — Last Post 04/24/14, 03:12PM

Real Estate Investing

Real Estate Strategies

Wholesaling

5646 topics, 44018 posts — Last Post 04/24/14, 09:33PM

Rehabbing and House Flipping

3354 topics, 31121 posts — Last Post 04/24/14, 08:41PM

Real Estate Development & New Home Construction

554 topics, 4696 posts — Last Post 04/24/14, 09:03PM

Innovative Strategies

705 topics, 6044 posts — Last Post 04/22/14, 04:06PM

Tax Liens, Notes, Paper, & Cash Flows Discussion

869 topics, 6706 posts — Last Post 04/24/14, 08:29PM

Rent to Own a.k.a. Lease Purchase, Lease Options

700 topics, 4961 posts — Last Post 04/24/14, 11:26AM

1031 Exchanges

143 topics, 1063 posts — Last Post 04/24/14, 11:10AM

Foreclosure Investing

General Foreclosure & Pre-Foreclosure Forums

1693 topics, 11320 posts — Last Post 04/24/14, 06:10PM

HUD, VA, and Tax Sales

416 topics, 3103 posts — Last Post 04/23/14, 02:29PM

REOs

1217 topics, 10604 posts — Last Post 04/24/14, 07:13AM

Short Sales

1539 topics, 13154 posts — Last Post 04/23/14, 08:25PM

Landlord & Tenant Forums

Landlord & Rental Property Questions

7260 topics, 71291 posts — Last Post 04/24/14, 09:37PM

Mobile Homes & Mobile Home Park Investing

639 topics, 5146 posts — Last Post 04/24/14, 05:13AM

Investor Basics

Starting Out

7739 topics, 60737 posts — Last Post 04/24/14, 09:18PM

Investor Psychology

434 topics, 6132 posts — Last Post 04/24/14, 09:03PM

General Real Estate Investing

4733 topics, 37339 posts — Last Post 04/24/14, 09:09PM

Real Estate Investor Marketing

1740 topics, 14165 posts — Last Post 04/24/14, 05:08PM

Commercial Real Estate

Commercial Real Estate Investing Forum

1414 topics, 9022 posts — Last Post 04/24/14, 04:12PM

Multi-Family and Apartment Investing

1124 topics, 9418 posts — Last Post 04/24/14, 09:28PM

The Business of Real Estate

Real Estate Technology and the Internet

Real Estate Technology, Social Media & Blogging

645 topics, 4913 posts — Last Post 04/24/14, 12:21PM

Business Basics

Goals, Business Plans & Entities

836 topics, 7599 posts — Last Post 04/24/14, 08:45PM

Real Estate Finance & Legal

Financial, Tax, and Legal

Tax, Legal Issues, Contracts, Self-Directed IRA

2806 topics, 20152 posts — Last Post 04/24/14, 08:36PM

Property Insurance

312 topics, 2059 posts — Last Post 04/24/14, 10:22AM

Personal Finance Discussion

330 topics, 2754 posts — Last Post 04/22/14, 12:06PM

Loans, Mortgages, Credit Lines

Private & Conventional Lending Discussion

2854 topics, 19852 posts — Last Post 04/24/14, 09:30PM

Creative Real Estate Financing

1221 topics, 8872 posts — Last Post 04/24/14, 07:36PM

Crowdfunding Real Estate

35 topics, 463 posts — Last Post 04/19/14, 06:24PM

Real Estate Professionals

Real Estate Professionals

Real Estate Agents

1219 topics, 8054 posts — Last Post 04/24/14, 09:40PM

Bankers, Lenders, and Mortgage Brokers

442 topics, 1931 posts — Last Post 04/23/14, 09:04PM

Contractors

268 topics, 1689 posts — Last Post 04/24/14, 05:05PM

Local Real Estate

Local Real Estate

Local Real Estate Networking & Recommendations

2023 topics, 11776 posts — Last Post 04/24/14, 06:51PM

Americans & International Real Estate

162 topics, 572 posts — Last Post 04/24/14, 03:31AM

Foreigners Buying in the USA

62 topics, 409 posts — Last Post 04/10/14, 06:27AM

Canadian Real Estate

66 topics, 441 posts — Last Post 04/24/14, 08:06PM

Marketplace

Real Estate Marketplace

Real Estate Marketplace

15101 topics, 54173 posts — Last Post 04/24/14, 09:40PM

Real Estate Events and Happenings

169 topics, 2627 posts — Last Post 04/24/14, 09:13PM

Off-Topic

Off Topic

Off-Topic

2909 topics, 32451 posts — Last Post 04/24/14, 07:22PM

Housing News & Real Estate Market

923 topics, 8398 posts — Last Post 04/24/14, 09:05PM

BiggerPockets Real Estate Investing Summit

97 topics, 1752 posts — Last Post 04/23/14, 04:51AM

BiggerPockets Resources

Forums » Commercial Real Estate Investing Forum » help running 4 plex numbers...

help running 4 plex numbers...

22 posts by 9 users

Signup

This topic has been locked by an administrator.

· Northwest , Pennsylvania


4 plex in a decent area. All units are 1 bedroom 1 bath. Brick building with a newer rubber roof and a carport in the rear that could use some work.

asking - $105000 (price has steadily been decreasing...thinking more in the range of 85K to 95K)
Each unit rents for $395/month

Thinking of a 15 year fixed mortgage at 3.5%
25% down
property taxes - $3500 / year
Insurance - $1000 / year
Management fee - 10% of total rents (monthly)

I ran numbers and am on the fence.

Any input is much appreaciated

Thanks



· Northwest , Pennsylvania


few questions I have...how do you figure in vacancies? also not sure how to figure misc. expenses?

With vacancies the 15 yr mortgage does not leave much cashflow...may have to look at 30 yr. at a little bit of a higher rate



· Seattle, Washington


Hey @Craig Montesano, check out this post http://www.biggerpockets.com/renewsblog/2010/06/30/introduction-to-real-estate-analysis-investing/

Hopefully that helps you. A good rule-of-thumb is the 50% rule: Expenses (NOT including the P&I payment) will take up half the gross rent.

Gross Rent: 395 x 4 = 1580
50% Rule: 1580 / 2 = 790
P&I: (You'll have to add this in)
Cash Flow: Whatever is left after the P&I payment.

Most investors aim for a minimum of 100$ a door/unit.

I'd start there and then see what some more experience investors think.

Good luck!



Real Estate Investor · Dallas, Texas


@Craig Montesano - one question: are all the utilities paid by the tenants, or some by the landlord? That's a big factor, especially somewhere with cold winters like PA, if the heat were paid by the landlord. Also, the 50% rule that David mentions above assumes that the tenant pays all utilities. You have to add more to the expenses if the landlord pays utilities.
-Harry



· Northwest , Pennsylvania


yes, I forgot to add tenants pay utilities

Great link David....lots of good info.

using the 50% rule...looks like something I should walk away from



Real Estate Investor · Dallas, Texas


@Craig Montesano - what numbers are you coming up with? It looks like a pretty good deal to me.
Price - 105000

Down - 26250 (25%)
Closing, etc - 3000
Total cash invested: 29250

Gross rents - 1580
Expenses - 790
Debt service (30 yrs, 4.5%) - 399
Cash flow - 391
Cash on Cash return - 16.04%
Total ROI (includes mortgage paydown) - 20.38%

By the numbers, that's a really good deal. The only reservation I'd have is that at 395/month, you could be getting some pretty rough tenants.

-Harry



· Northwest , Pennsylvania


Thanks Harry....I was able to run my numbers fine on my single family homes, but this one is throwing me for a loop. At first I thought it was a good deal, then I didnt. confused???

Your numbers helped alot.

I think the problem is I was concentrating on a 15 year fixed at 3.5% and with Prin., int., taxes, ins. I was coming up with a $880 (roughly monthly payment)

I need to look at a 30 year. Looks like a better deal going that route. Does your 399 mortgage inclue taxes and ins?

ALso, could you recommend a good mortgage calculater.



· Northwest , Pennsylvania


Think the sellers are looking for a quick sale....may be able to get for around $85K.

Yeah, I know $395/month is pretty cheap and could attract some riff raff. 3 out of 4 of the units are currently rented. When tunover occurs I am think of bumping rent to $425ish. That seems like the going rate for 1 bedroom units in that area



Real Estate Investor · Aptos, California


Are you managing yourself or using a pm? It might not be worth the effort if you need to deal with these types of people by yourself the first property out.



Real Estate Investor · Dallas, Texas


Originally posted by @Craig Montesano:
Thanks Harry....I was able to run my numbers fine on my single family homes, but this one is throwing me for a loop. At first I thought it was a good deal, then I didnt. confused???

Your numbers helped alot.

I think the problem is I was concentrating on a 15 year fixed at 3.5% and with Prin., int., taxes, ins. I was coming up with a $880 (roughly monthly payment)

I need to look at a 30 year. Looks like a better deal going that route. Does your 399 mortgage inclue taxes and ins?

ALso, could you recommend a good mortgage calculater.

Hey Craig, the 399 mortgage payment I came up with doesn't include taxes and insurance. That went into the 790 I put for expenses.

I just ran it with a 15 year loan and 3.5% interest, and the P&I part of the mortgage goes up to 563, cash flow down to 227, for 9.3% cash on cash, but 23.2% total ROI when you factor the mortgage pay-down.

My opinion is that 15 year mortgages don't make a whole lot of sense for investing in RE. The difference in interest is usually only around 0.5%, but in return you're agreeing to make this extra principle payment for 15 years. That extra principal payment would make a much better return if it was used towards the down payment on the next property. And there's nothing stopping a person from reaching a point where they have enough properties, and then voluntarily paying down the principal on the mortgages. That just seems like a lot of flexibility (and potential return) to give up for about an 0.5% difference in interest rate.

Regarding mortgage calculators. I'm not sure if we're supposed to post outside links here, but if you google "mortgage calculator" or "amortization calculator" or "amortization schedule" it will come up with a bunch of them.
Do you have excel or open office? If so, you can you can use the PMT function to figure it out too.

-Harry



Multi-family Investor · Porter Ranch, California


Hey Craig:

Im a noob around these parts and if my .02 helps, I am tickled to bring it.

A coupla things stick out:

at some point, the deal becomes golden and the math makes sense. you toyed with 85K ish being a possibility. Understand Mike's 50% rule and discover what that buying opportunity number means.

What about below market rents? If you can boost the rents over time to squeeze this puppy into the positive cashflow side, then this dog will hunt.

What is the condition to the property, and why is the seller so eager to dump it, er sell it to you?

Dig deeper brother dig deeper, I am interested in folllowing your journey.

Blessings all in your walk,

Tevis



· Northwest , Pennsylvania


Even with 30 year mortgage at 4% (which I think is the rate my local bank would give me) it seems like a sour deal. I would escrow taxes and ins. which make the monthly payment about $730.

Gross rents are 1580
Property manager - $158 (10%)

With half vacancy rents are only $790, which would barely cover the mortgage.

Im I looking at this wrong???

Thanks guys for all the help and insight...



· Northwest , Pennsylvania


am i calculating mortgage right?



Real Estate Investor · Audubon, Pennsylvania


For rents around $500, there is a quick and dirty rule of thumb called the "2% rule" - rents should be 2% of acquisition costs. That would make total acquisition costs (including repairs and rehab) a max of $79K. Now for rents below $500, a higher percentage is more appropriate, since the $100 cash flow per door is a bigger chunk of rent. And those lower rent tenants can be more management intensive ...

And you don't have to exactly follow any rule of thumb ...


Steve Babiak, Redeeming Properties, LLC
Telephone: 6109082183
...


Multi-family Investor · Atlanta, Georgia


Here is my analysis, your tax rate seems... high

a 30 year mortgage increases your door profits to 105.47/117.51

I would not take it.



· Northwest , Pennsylvania


Thanks Ryan...very cool spreadsheet. Where can I find that?

As much as I dont want to, I think I will need to walk away from this one.

There are a few duplexes in the area that might be more profitable.

On the 15 year mortgage note...I did my 2 single family homes at 15 years which had a lower rate. I wish Id done the 30 year....Id have twice the cash flow. oh well I guess there has to be some kind of learning curve and in the long run I will save some dough

Thanks guys for all your insight...this site is great.



Multi-family Investor · Atlanta, Georgia


@Craig Montesano
That's the spreadsheet I put together for analyzing properties, you can find it in my fileplace
http://www.biggerpockets.com/files/user/RHalverson/file/mf-rei-analyzer-v2

Lots of Real Estate Investors will tell you it's about leveraging the money you have or get lent. Many people get hard money loans at 12-15%, rehab a house, and then either refi the house at a higher appraised value to pay off the hard money loan or sell it quickly to pay back the loan in full. If the difference between 15/30 year loans was 3.5% and 8% I can bet more might do a 15 year loan but a half percent is negligible when you can leverage that half percent elsewhere for way more ROI.



Real Estate Investor · Audubon, Pennsylvania


@Ryan Halverson - what "taxes" does that spreadsheet refer to? If those are supposed to be the property taxes, then your sheet wouldn't do the right thing in many areas. For example, in my area, taxes are based on the assessor's valuation of the property (and not on the actual sales price as might happen elsewhere), multiplied by a millage rate; essentially, the taxes are fixed except that they raise the millage :) Might be something for you to consider as you evolve that spreadsheet.


Steve Babiak, Redeeming Properties, LLC
Telephone: 6109082183
...


Multi-family Investor · Atlanta, Georgia


@Steve Babiak I did a little research before making it, nothing comprehensive. I understand it is generally 40% of assessors value multiplied by the millage rate? Either way 3500/year for a 95k property is pretty high. Maybe the assessor has your property appraised from a long time ago?



Real Estate Investor · Audubon, Pennsylvania


@Ryan Halverson - the assessor's value is not necessarily "old"; they will increase for any improvements where a permit was pulled and that improvement changed their valuation. Just saying that any fixed percentage being calculated will likely be inaccurate when compared to the actuals from the assessor.


Steve Babiak, Redeeming Properties, LLC
Telephone: 6109082183
...




Sign up