What am I overlooking!!? 4-plex deal

Question

Looking at a 4 plex listed for $225,000

Rent on each unit is $700 is gross rent is $2800

I’m gonna factor in $15000 for repairs and a couple updates that may be needed.

Tax on the property is $3830

Going to be using a property management co. At 10%

Putting 25% down. And I’m paying water and garbage.

10% maintained

9% capEx

1 month vacancy = 1 month of gross income.

I feel like it’s a good deal but my numbers say otherwise. What am I over looking?

Thanks to all!!

Account Closed · Answer

Lawncare, snow removal is the two that come to mind.

Figure out how to bill back water and garbage or raise rents to account for it.  Obviously market dependent.

Henry Kaldenbaugh · Answer

@Jared Smith:  Your deal is very similar to mine.  you might want to consider RUBS utility billing.  You proportion out the utilities that you pay to each tenant.  You can do this by square ft. or occupancy.  this is billed to the tenants each month with their rent.

1 person = 1.0 (1 person pays 100% of 1)

2 people = 1.6 (2 people pay 60% more than 1)

3 people = 1.9 (3 people pay 30% more than 2)

4 people = 2.2 (4 people pay 30% more than 3)

5 people = 2.5 )5 people pay 30% more than 4)

6 people = 2.8 (6 people pay 30% more than 5)

Your Property’s Utility Bill =     $1,500.00

10% deduction for common area =    $(150.00)

Total amount to allocate by formula=    $1,350.00

Syed H. · Answer

I don't see insurance and also replacement reserves.

Jay Levy · Answer

Don't forget to include insurance costs.

My model has this with about an a $600 a month in net income with a 30 year 5% mortgage at 75% and the rehab factored in the mortgage with a cap rate around 8%

Craig Jeppesen · Answer

Get the seller to pay for the repairs or lower your price to work the repairs into the deal. Without the repairs it is a decent deal.

Jared Smith · Answer

@Henry Kaldenbaugh

This is so kind of you to break down for me in so much detail Henry! Thank you! I will for sure see if this is something I can do with this deal. Gosh, thank you so much!

Jared Smith · Answer

@Eric C.

I love that idea!! Great point! I just heard about that two days ago and didn’t event consider it!

Jared Smith · Answer

@Jay Levy

Thank you Jay! That is super helpful!

What am I overlooking!!? 4-plex deal

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