12 Unit Capex and other questions

5 Replies

I've been building a spreadsheet that I can use to evaluate properties. I didn't see J Scott's SFH spreadsheet until after I started, but I usually like to build my own anyways. But down to my details/questions.

I'm looking at/trying to evaluate a 12 unit complex in Houston (3 4-plex buildings). The cost is $375k and the rent they say they are getting is $450/month/unit. Based on the area $450 seems reasonable and that's what I was using to take a look at it. When using the 50% rule as a quick evaluation the property seems ok. I haven't looked at the property yet so I don't know anything that would make this look worse than the 50% rule. However when I plug my numbers in the cash flow looks negative. I'm pretty sure I'm overestimating one/all of the following items and that's what is causing my spreadsheet to look so dismal. 

Insurance ($350/unit/year) 

Water/sewer ($40/unit/month) 

Maintenance ($40/unit/month) 

Capex ($563 total/month - breakdown is below).

I posted a picture of my spreadsheet how it currently is with my concerns highlighted in red. Feel free to point out errors anywhere in the sheet though. I can't figure out how to attach it otherwise I would.

Thanks for any insight you can give,

Zach

@Zach DeKruif ,

Your mortgage assumptions are wrong. If this as a commercial loan, you won't get 90% LTV. 75% is more likely. Also there is no PMI on commercial loans and the rate should be close to 5%.

Nick

Also - there should be no uncertainty around things like the actual utility costs.  You can make an offer then get the actuals and they are what they are.  Your capex is fairly high too.  People usually use a $150-$250 per unit per year amount - with newer units being less expensive and older more.  Even at $250 - you are looking at $3000 per year for this, which is less than $300 per month.  You have $563.  While I think your analysis is very detailed on it, it is giving you higher numbers than people normally would use.  Lastly, there's no reason you should pay more than 5.25% on the loan.

Oh - and another possibility that i did with an 8-plex formed from 2 4-plexes that i had - was to finance each separately as a 4-plex and as a comforming loan.  You'd have 3 loans, but your rate should drop into the mid-4's.  I did that with Wells Fargo too, and they like Houston as a viable investment market.

Good luck.

Your monthly insurance is $350 per unit. At least according to the spreadsheet.

I'm failing at technology. Sorry

Originally posted by @Nick B.:

@Zach DeKruif,

Your mortgage assumptions are wrong. If this as a commercial loan, you won't get 90% LTV. 75% is more likely. Also there is no PMI on commercial loans and the rate should be close to 5%.

Nick

Originally posted by @Mark Mosch:

Also - there should be no uncertainty around things like the actual utility costs. You can make an offer then get the actuals and they are what they are. Your capex is fairly high too. People usually use a $150-$250 per unit per year amount - with newer units being less expensive and older more. Even at $250 - you are looking at $3000 per year for this, which is less than $300 per month. You have $563. While I think your analysis is very detailed on it, it is giving you higher numbers than people normally would use. Lastly, there's no reason you should pay more than 5.25% on the loan.

Oh - and another possibility that i did with an 8-plex formed from 2 4-plexes that i had - was to finance each separately as a 4-plex and as a comforming loan. You'd have 3 loans, but your rate should drop into the mid-4's. I did that with Wells Fargo too, and they like Houston as a viable investment market.

Good luck.


Originally posted by @Mark Parzych :

Your monthly insurance is $350 per unit. At least according to the spreadsheet.

Thanks for pointing that out. I initially built this for financing for a fourplex and I wanted to see how my payments varied with the amount down. My current mortgage guy doesn't do apartment building so I'm in the process of getting someone else. I'm hoping to be able to get 90% LTV, but from all the reading I've been doing about different loans 75-80% seems more common, and I didn't realize PMI wasn't on commercial loans at all.

Thanks Mark. As I mentioned above I'm working on getting a lender so I don't want to make an offer until I have that squared away. I really like your idea of splitting the fourplexes up and getting loans on them individually. I'll see what my current lender's thoughts are on that.

Those numbers make complete sense for capex numbers (and I was using a flat 200 initially), but wanted to see how that stacked up to what I needed. 

That's coincidence because there are 12 units.