BiggerPockets

Hello all,

I normally do single fam, so I wanted a quick hand with numbers on a deal I'm considering.

Location and repairs aside, strictly by numbers, what do you guys make of this deal:

Single house, 3 fam:
- 2 bed/1 bath
- 2 bed/1 bath
- 2 bed/1 bath
- 2 car garage
- separate meters

Total rent is $2,500.
Monthly taxes are $320

What would be a good estimate for monthly expenses (50% rule??) As investors (cash buyers looking to refi out), how much would you pay for this deal, strictly by #'s?

thanks!!

Paul

Could you share with us
How long you plan to hold on to the
property
Expected capital and rental growth
rate
Vacancy rate
Utilities cost
Typical cap rates in the area

I agree with John in that it is extremely difficult to predict growth rates. That being said, investors often pay for the anticipated benefits of ownership, including rental rates. One can investigate probable ranges in rental growths/decline by looking at the past history and looking ahead at certain market indicators.

Utilities and vacancy expenses can vary considerably depending on the market area, quality of the construction, and type of tenant. Though the 50% rule is quite good and convenient, I would rather project possible rents and expenses under different economic conditions (say expenses range from 40-60% or the property appreciated/depreciated from -5 to +5%, so that I can have a handle on the range of possible values.

You are correct in that cap rates are not relevant in finding the market value of a SFR. I find it useful analyzing what the market value and what the investment value would be for my particular circumstances. Investment value differs with an individuals risk preference, financial situation, asset allocation etc. I would say Cap rates would just be a starting off point before a more thorough analysis is taken.