Deal analysis: How would the numbers ever work on this as-is?

Question

I'm a rookie with duplex and SFH and using Brandon's 4-square video/form to run the numbers on this listing in my area (Chattanooga):  https://www.realtor.com/reales...

Just a dream analysis, since I don't have the means to make it work for myself. And I'm likely making a mistake using a typical mortgage calculator and underestimating the insurance on 3 buildings. But with that said, with a 20% down payment and 4.25% interest rate, I'm getting -$119/month cash flow and a -.51% cash on cash return.

No wonder it's been listed for 41 days?

Jaysen Medhurst · Answer

Unless there's a ton of value-add opportunity, @Rik Hunter, this is nearly impossible. Almost the entire rent is eaten up by the debt service. These look to be priced as individual retail properties, which may justify the price. But an investor is very unlikely to buy up all three, since it's way cheaper to buy a single 10-unit property and pay based on income/Cap Rate.

Brian Levredge · Answer

Expenses on multi-family typically run around 40% including PM down here once stabilized.  Your gross is currently $5940/month, so NOI would be $3564 a month on actuals.  20% down at 3.95% for 20 years (it won't qualify for longer-term) is $5551/month so you'd be losing about 2k per month.  There is actually a lot of upside on the rents by about $300/unit, but even with that built in (9k gross), you'd still be losing about $150/month so it still doesn't work without a larger down payment.  This is the kind of property you usually see someone 1031 into because they are running out of time, and rather than just pay the tax (which they should) they overpay for something that doesn't work well.  Plus assume you'll have decent capex to get the units to a place in order to get $900/month per door and it starts to look much worse.