your analysis on my 8 plex analysis

11 Replies

Give me the good, bad and ugly on my first rental property please.

I am buying a 8 plex in Indiana for the purpose of rental income. There are no repairs to be done. Here are the details.

monthly rental income $4,325 x 12=51,900

cash flow $1,606 x 12= 19,272

approx. NOI 29,407

cash on cash ROI 41.89%

monthly expenses 2,719 x 12= 32,628

purchase price 157,000

25% down= 40k

financing 117k

5.1% 5 year arm / 30 years

my expenses include tax, ins, water, sewer, garbage, vacancy, repairs, capex, prop mgmt, mortgage.

Updated about 3 years ago

Corrections to my post: 20% down = 31,400 closing and other costs 6,000 total investment 37,400 25 year amoritization monthly expenses 2,778 annual cash flow 18,564 cash on cash return 50%

Congrats on landing a deal. I don't think anyone is going to complain about a CoC return of 40%. It's hard to say if you're including everything in the expenses based on the info provided. They do seem a little low. What % are you factoring in for vacancy, maintenance, Capex, property management? Your update adds more confusion.

Who is the lender? I've spoken with several in the area and i can't find any who will amortize the loan over 30yrs. Everyone I'm talking with is doing 5/20. That 10yr difference is huge on cash flow on these smaller properties. 

@Chuck Rhodus Looks great! I agree to double check your expenses but even if you are off by $100/unit/month it still looks good. Rent does seem a little low so be careful with your vacancy % and your repair between tenants. At the lower rents, the units tend to get trashed and turnover is high. As long as you account for it, you will be fine.

Chuck,

I ran the numbers you put out and one of us is doing something terribly wrong! I come up with a cash on cash return of 11.82%. I took a purchase price of $157k, then I added in monthly expenses of $2778 and rents of $4400. That calculates to 11.82% CCR. Just thought I'd let you know.

That’s a pretty inexpensive per/unit purchase price, I would be sure your vacancy rate reflects the clientele. And I’d also make sure that no repairs needed is accurate. I find it hard to believe you won’t need to re-key, paint, new flooring in some units...etc. 

Lastly who pays electric, trash...etc?

As the correction shows the ROI is 50%. I am using increased numbers in all the costs compared to what they are now. For the vacancy, repairs and CapEx I am setting aside $700 monthly.

The correction on the loan is 5/25 years (Jesse Vega of Royal Bank in South Chgo).

Sorry for the confusion.

@Scott Steffek, I am new at this and I could be doing it wrong. I did also punch it in the bigger pockets buy & hold analysis and it agrees with the 50% roi.

What I am doing is taking the annual cash flow and dividing it into the total investment.

18,564 by 37,400=50%

@Ali Hashemi , the rents are competitive for the area but could be raised a tad. Tenants pay utilities and I pay water & trash. All figured in. I also included property mgmt costs. 

I time, updates will be made but now, I see no pressing issues.

Originally posted by @Ryan Blake :

@Chuck Rhodus Looks great! I agree to double check your expenses but even if you are off by $100/unit/month it still looks good. Rent does seem a little low so be careful with your vacancy % and your repair between tenants. At the lower rents, the units tend to get trashed and turnover is high. As long as you account for it, you will be fine.

 @Ryan Blake, the rents were confirmed by each renter I met with and docs from the owner. They agree.