Are my cash flow calculations accurate?

Question

Hi all,

Im trying to see how much cash flow I  would have if I'd finance 100% of the property. In other words, the 20%  required for the down payment of the property comes from a conventional  loan. Thing is, I've never done this before so I dont know if these are correct calculations. Im basing all of this from the loopnet numbers (link)

$700k, 7 unit, Chicago IL.

30 year 560k mortgage, 4% int.

10 year 140k conventional loan, 4% int.

Real Estate Taxes: 6571

Insurance: 4007

Gas: 863

Water/Sewer: 3287

Electric: 846

Scavenger: 1855

Janitor: 630

Maintenance & Repairs: 3224

6% Vacancy Loss: 5673

Yearly/Monthly Rent Income: 94560/7880

Yearly/Monthly Expenses: 26956/2246

Yearly/Monthly NOI: 67604/5633

Monthly Payments

Mortgage (only P&I since RE tax & insurance are already covered at the top)(*): 2674

Conventional Loan: 1417

Monthly Cash Flow = NOI - (Mortgage + Conventional Loan) = 1542.

Im not sure if my numbers are accurate... Am I missing something? Im  probably miscalculating where I placed the (*). There are two real  estate taxes: the one that appears in loopnet and the one that its on  the zillow mortgage calculator. If I take into account the two it leaves  1008 cash flow... What do you think?

Ibn Abney · Answer

@Josh Sanders Few things:

4% INT looks way to low. Especially on the a 30yr commercial note. I believe its closer to 6.5%-7.5%

4% on a conventional loan ?? Do you mean personal loan/line of credit? 4% still looks low. I would guess 8-12% unless private lender

water looks low. I pay about $850-$950 for a 2bdroom townhome. Non-metered though!!

Insurance looks low too. I have a 3 unit which is $3400/yr. Different area, but $4K looks low for this area.

Where is your PM fees? Are you going to self manage? do all the leasing?

I do see landscaping/snow removal?

Also, you are assuming 100% occupancy. If one unit has an eviction issue, that 4-6 months no cash flow. 1/7 is 14% roughly, of monthly gross rent.

Best of LUck!

Uneeq Khan · Answer

When calculating cash on cash, do you include PM, vacancy,  cap ex, and maintenance, into the calculation?

I've done calculation both ways, and one way gives me 4% while the other 20%. Going to guess the 4% is the more accurate one.

How can I reverse calculate what the purchase price should be so I can get 12% cash on cash? Right now I'm getting the purchase price should be half the ask price in order to get 12% cash on cash.

Josh Sanders · Answer

Thank you! A few questions: is that 4-6 months of eviction considered slow in comparison to other states like florida or missouri? Also, is there a way for me to check if the insurance-water numbers shown in loopnet are true?