Help with Analysis on a Multifamily Property

2 Replies

Im about to make an offer on my first MFH.  I don't know if it's necessarily a grand slam, but I wanted a few other opinions. I found a 3 family property, fully rented with long term tenants. 2 - 1br units and 1 - 2br unit.  1br rents for 800 and the 2br rents for 1050, making gross total rent 2650. 

The property is in pretty decent condition, I figure 5k for repairs, all cosmetic. 

3800 a year in property taxes, 

1200 a year in Homeowners Ins. 

1300 for flood ins.  

ARV is approx 190k-200k

Asking price is 185k. Seller is somewhat motivated.

I'll be getting a conventional 15yr loan with 25% down

Any advice would be greatly appreciated. Im open to any and all opinions/constructive criticism. 

Using the 50% rule (generally expenses would be 40-60% of rental income), you're sitting right at about a 7-8% CAP Rate. How does that compare to other multi's in your market of interest. You have two really good things going for you: mixed units and gross rents > 1% of proposed purchase price. However, I would probably shoot for at least 10% below ARV, AFTER repairs (i.e., the $5k), and I would shoot for about 20-30% below to give you some good wiggle room.

From what I was able to dig up, the CAP rate of that area is right around 6-12%, so I don't think it's too bad. Everything seemed pretty sound, I just wanted another opinion, just to make sure I wasn't missing something. Thanks for the advice, I'll keep my process up to date on this thread.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.