Multiplex with shared utilities buy or walk away?

Question

Here it is.  Nice large older home off of a downtown area. Not to bad of area. Some abandoned homes and some quite nice   This home is done! Newer windows upstairs, two new furnaces with a/c, newer water heater, new vinyl siding (done well) only 30k to buy!!!!!  So where is the problem. All utilites will have to be paid me!!! Math is broke down like this. 10 yr loan 305/ month est of 300/ month total utilities (gas water and elc). 60/ month taxs and ins. Give me a "base" month cost of 665. Lets not get into vacancy rates and maintance accounts..... Lets just talk basics.  Each unit (2) is a two bedroom two bath. Dishwashers, stove, refridg, and cloth washer and dryers.   The believe i can rent the upstairs for $500 and down stairs for 575. Total income of 1075- 665 leaves 410/ month. Do I buy?

Larry K. · Answer

Lets say the $430/month NOI is right
430x12=5,160 NOI yearly
5,160/30,000=17% cap rate
Not sure how much your are putting down but buying at a 17 cap is a good deal for you.

Mark Bradford · Answer

Wow looks like I need to talk with that Suzie lady some more!  She is in the know.  Good thing she handles the finances.  Lol. Ok. I was wondered if anyone would jump on the utilities have to be paid by me. That was a big concern by us.  I hate to pay for anything "I" dont use. Well I think we have let this deal go not beccause it was a bad deal but it just didnt fit our portfolio. I guess we learn from every deal or not deal.  But as you own more properties you can decide what might be a deal for you might not always be a deal for the overall business

Suzie B. · Answer

I believe Matt is taking our projected income for the property -50% (expected expenses for the property (insurance, repairs, taxes, upkeep, vacancy)-%10 for utilities).   The 50% includes property management by someone other than yourself.  This is usually included unless you mention you plan to manage yourself.

$1075- (%50+%10)= $430
$430-$305 (mortgage) = $125 profit

$125/2= $62.50 per door
Most here prefer to see $100-$200 per door.

Mark Bradford · Answer

Im somewhat new to the "true" ways to figure properties. So help me out. Can you explain your math to me.

Matt Devincenzo · Answer

$1075*.6(50% plus 10% for utilities)=$645

$1075-$645=$430

$430-$305= $125

I'd say pass unless you can account for the initial expense of splitting utilities or raising rent.

Multiplex with shared utilities buy or walk away?

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