4-plex numbers overview

15 Replies

How does this 4-plex deal sound to you guys?

2 apts rent for $500/mo

1 apt rents for $525/mo

1 is currently being renovated & when ready will be renting also for $525/mo

Insured for $200k

Property Tax $653/yr

Hazardous & Flood insurance $2771/yr

4000 sqft

2/1 & 2/2

6.3 miles from major University

asking price $125k 

I will be going to look at it tomorrow.

You guys helpful information & suggestions are greatly appreciated.

Houston is a complex market and I don't know every neighborhood, I only know the south side really. However, gross rent roll of $2,050 on a $125,000 property seems like a pretty good deal. And your expenses don't seem out of whack. 

property tax seems low. I would expect between 3000 to $6000. But I'm not familiar with multi families. 

@Jay S.  

Your at a Gross Rent Multiplier of 5.09, which is not a home run but it is very solid. I would definitely take a look at this deal. My quick analysis looks like this:

Gross Potential Income = $24,600

Net Operating Income = $12,300 (50% guideline)

Debt Service = $7920 (Assumes 80% LTV, 5%, 20 year amortization)

Cash Flow = $4,380

Cash on Cash Return = 18% ($4,380 / $25,000 down)

This is just a quick analysis. You will need to go far more in depth if you decide to move forward. But on the surface I would say this looks like a deal.

@Jay S.  looking forward to hearing what You think after inspection.  

Originally posted by @Brady Ernst:

@Jay Sassau 

Your at a Gross Rent Multiplier of 5.09, which is not a home run but it is very solid. I would definitely take a look at this deal. My quick analysis looks like this:

Gross Potential Income = $24,600

Net Operating Income = $12,300 (50% guideline)

Debt Service = $7920 (Assumes 80% LTV, 5%, 20 year amortization)

Cash Flow = $4,380

Cash on Cash Return = 18% ($4,380 / $25,000 down)

This is just a quick analysis. You will need to go far more in depth if you decide to move forward. But on the surface I would say this looks like a deal.

Thanks for the break down...quick question. When you mentioned go "far more in depth" could you elaborate a little bit more on some specifics? 

Thanks a lot.

@Tom Keith I will keep you posted on the ins & outs of the property. 

Thanks for posting.

@Mike Landry  I glad they are not but I will be double checking these numbers.

Hi Jay,

I must agree with @Mike Landry  tax is low, I would double check with hcad.org. Also make sure it is listed as multi-family. I have seen multi-family properties listed as single family houses which is indication that most likely the conversion was done with out permits. Also I do not like properties in flood zone. However, numbers look good but make sure you check them do not trust anyone. 

Good luck !!!

Welcome to BP.

Property taxes are very low. They will go up when you buy this property even at $125,000. You must account it.

Originally posted by @Brady Ernst:

@Jay S.  

Your at a Gross Rent Multiplier of 5.09, which is not a home run but it is very solid. I would definitely take a look at this deal. My quick analysis looks like this:

Gross Potential Income = $24,600

Net Operating Income = $12,300 (50% guideline)

Debt Service = $7920 (Assumes 80% LTV, 5%, 20 year amortization)

Cash Flow = $4,380

Cash on Cash Return = 18% ($4,380 / $25,000 down)

This is just a quick analysis. You will need to go far more in depth if you decide to move forward. But on the surface I would say this looks like a deal.

@jay sassau

Just curious why you did a 20 year amortization instead of 30? This should be able to qualify for residential if it's 4 units and a 30 year amortization would improve cash flow. 

@Yavor Tomov  Thanks for your advice I will make sure I do so & yes I agree do not trust anyone.

@James Syed Thanks for the post I will add to my spreadsheet until I get the exact number.

@Philip K.  actually this quoted message originated from Brady emst post.

@Philip K. ,

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Raymond

 @Jay S.   I agree with the others.  There's no way that tax is correct.  It's going to be close to 3%, so I'd plan on $3,750/year on a $125K building.  I'm not sure if multi-family rates are different than singles.  It would be good to find that out.

Making the 50% rule work in Texas is difficult due to the high property taxes.  If flood insurance is required, I don't think you'll get close.

As a newbie, it has taken me awhile to figure out that I can't just take the rental income, divide it in half and ASSUME that's what my expenses will be.  Rather, I need to look at it in reverse.  What will the monthly expenses be?  Can I get twice that much in rent?  If not, it might not be a good deal.  EXCEPT that in Texas, due to property taxes, the expenses will almost always come in at more than half of the rent.  It's starting to look to me like 60% for expenses might be a better target.  This doesn't mean the deal is not as good as one in another state, though.  We don't have income tax, so any cash flow you end up with will not have a state income tax applied to it.

@Leigh Ann Smith   Hi, thanks for posting...you are correct the property tax here in Texas & I didn't mention that this property is located in another state where property tax is extremely low. I also found out that there is a existing mortgage on the property & assessment value is $110k.

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