What would you pay for this fourplex?

2007 model fourplex near Austin TX
3700sf total, all 2bed/2bath units,2 stories, carports
2.85% taxes
HOA $360/mo (community center and pool, workout room, etc)
2 units currently rented for 859 and 979, other two should be about 859 as well (979 unit is partially furnished)
Very nice area, desirable location (schools, employers, etc)
$0 needed in repairs

What is the max price you are willing to pay? Lets assume 20% down.

Edited: 06/26/2010 at 11:34AM

Michael Zuber

Real Estate Investor · Fresno, California

90 posts
2011 Influence
9 Awards

Icon_minipost Feb 08 '10, 10:33 AM

I can't speak for the Texas market but in my investment area I am seeing 4 plex with about 3K in income go for about 175K - 200k (w/ no association fees) and you can step up to fixers for about 125k

Edited: 06/26/2010 at 11:34AM

Ted Harris

Real Estate Investor · Portland, Oregon

660 posts
27102 Influence
15 Awards

Icon_minipost Feb 08 '10, 10:39 AM

$0 needed in repairs. What is the max price you are willing to pay? Lets assume 20% down.

Amount down shouldn't factor ... assuming HOA in good standing and zero repairs, I'd consider going as high as $170k

Edited: 06/26/2010 at 11:34AM

Jon Holdman

Real Estate Investor · Denver, Colorado

11853 posts
75493 Influence
15 Awards

Icon_minipost Feb 08 '10, 11:01 AM

OK, start with $859 rent per unit. Renting furniture for $120 a month is a separate business. Taxes in TX are high, and bugs are a problem, but you don't have heating problems or the damage inflicted by harsh winters. Assuming tentants pay all utilities, you should be close to the 50% rule.

OTOH, it sounds like a condo, so HOA fees are always a wild card. Personally, I loathe HOAs. Even when I lived in Houston for many years, which is rife with HOAs, I always avoided them.

So, here's my math:

Rent: $3436
Expenses: $1718 (includes vacancy and capital)
NOI: $1718
Desired cash flow: $400
Left for payment: $1318
Max loan (and price): $219,831.35 (assumes 30 years at 7%)

That's ignoring the down payment. Really, that's another way of saying you're making the same return on the down payment as you're paying on the loan. (If you're willing to invest your cash for zero return, PM me, I'll be glad to help you out. :-))

So, if we put in the down payment of 20%

Down: $43,955.27
Loan: $175,865.08
Actual payment: $1054.40
Cash flow: $663.60/month
Cash flow: $7963.20/year
Cash on cash return: 18%

Looks like the right price to me.

So, tell us, what are they asking?

Edited: 06/26/2010 at 11:34AM

Jon Holdman, Flying Phoenix LLC

Shawn Culhane

Residential Real Estate Agent · Cedar Park, Texas

13 posts
102 Influence

Icon_minipost Feb 08 '10, 12:12 PM

Thanks Jon, thats what I was looking for. They are asking $275k. Last purchase was in early 08, has a $325k note out on it.

Edited: 06/26/2010 at 11:34AM

Ted Harris

Real Estate Investor · Portland, Oregon

660 posts
27102 Influence
15 Awards

Icon_minipost Feb 08 '10, 01:11 PM

No one breaks it down better than Jon!!

Edited: 06/26/2010 at 11:34AM by Ted Harris

Jeffrey K.

Real Estate Investor · Milwaukee, Wisconsin

1313 posts
11439 Influence
12 Awards

Icon_minipost Feb 08 '10, 07:32 PM

What did you offer or are you listing this?

Edited: 06/26/2010 at 11:34AM

Shawn Culhane

Residential Real Estate Agent · Cedar Park, Texas

13 posts
102 Influence

Icon_minipost Feb 08 '10, 10:55 PM

Jeff, I am working with an investor who I thought would be interested in this, wanted to run it by a few of yall first.

Edited: 06/26/2010 at 11:34AM

Steve Babiak

Real Estate Investor · Audubon, Pennsylvania

3881 posts
74514 Influence
14 Awards

Icon_minipost Feb 08 '10, 11:52 PM

Most of the 1-4 unit multis that I see from the local MLS in my area aren't even worth the time it takes for running the numbers on them. So it doesn't surprise me to see the same thing elsewhere.

Edited: 06/26/2010 at 11:34AM

Shawn Culhane

Residential Real Estate Agent · Cedar Park, Texas

13 posts
102 Influence

Icon_minipost Feb 08 '10, 11:58 PM

Steve, that is exactly what I have found..

Edited: 06/26/2010 at 11:34AM

Sharad M.

Real Estate Investor · Chicago, Illinois

724 posts
6708 Influence
12 Awards

Icon_minipost Feb 09 '10, 10:38 AM

Rent: $3436
Expenses: $1718 (includes vacancy and capital)
NOI: $1718
Desired cash flow: $400
Left for payment: $1318
Max loan (and price): $219,831.35 (assumes 30 years at 7%)

Can Jon or anyone else please explain me how the Max Loan amount comes to $219,831.35? I recalculated the numbers, but I get to $198,105.37. Am I missing some cost of $21k here? Thanks in advance! :D

Edited: 06/26/2010 at 11:35AM

Sharad M.

Real Estate Investor · Chicago, Illinois

724 posts
6708 Influence
12 Awards

Icon_minipost Feb 09 '10, 10:52 AM

Rent: $3436
Expenses: $1718 (includes vacancy and capital)
NOI: $1718
Desired cash flow: $400
Left for payment: $1318
Max loan (and price): $219,831.35 (assumes 30 years at 7%)

Can Jon or anyone else please explain me how the Max Loan amount comes to $219,831.35? I recalculated the numbers, but I get to $198,105.37. Am I missing some cost of $21k here? Thanks in advance!

Down: $43,955.27
Loan: $175,865.08
Actual payment: $1054.40

I must be doing something wrong here, because if I use the loan amount of $175,865.08 at 7% interest for 30 years, I get an actual payment of $1,170.03.

However, if I use the actual payment of $1,054.40 to back into the loan amount, I get to $158,484.29, which is 80% of $198,105.37.

Edited: 06/26/2010 at 11:35AM