Help me analyze this deal please - first Multi family deal

6 Replies

Hello Everyone,

I have a couple SFH and now looking at moving into Multifamily. I am interested in the multifamily space for the forced value I can put in and the positive aspects of scale in a single location.

I am new to Mutli family analysis but have read some posts, listened to loads of podcasts and so I started to look over loopnet and see what could be some opportunities to analyze and determine investment possibilities.

I would appreciate the advise and review of more seasoned investors on the deal outlined below.

I would naturally request rent rolls, P&L and bank reconciliations, repair records and copy of the leases to validate the data.  

http://www.loopnet.com/lid/19547659

12 units $425k purchase price

10.5% cap rate

Dayton, OH

Washer / Dryer income

Forced Value opportunities I see:

Separate water meters - saves 5300 / year in expenses

Interior renovation and increase rents 10% ($50/month) over next 18 months

What do you think about this? I hear that if you find things on loopnet it is not a good deal since all the seasoned investors have already passed on it while it was off market and now it is up on the market. As a newbie venturing into the multi family waters, it looks like a decent opportunity to me and throws off a good cash flow - like my SFH investments.

I really appreciate, in advance, the advice and help.

It's hard to say without the rent roll and operating statement. A lot of it depends on the rent and current occupancy as well as how much repairs are necessary. And of course, I don't know the area even though the price point looks good from afar. That being said, the area at least seems to have a very low crime rate, which is a good start:

http://www.clrsearch.com/45431-Demographics/Crime-Rate

@Andrew Syrios is it feasible for @Cherry Patterson to get these items (rent rolls, P&L and bank reconciliations, repair records) prior to initiation of a contract? I can see the leases coming after a contract has been accepted by the seller. But the analysis depends greatly on the items rent, repair records, etc in order to make an offer.

Originally posted by @Daria B. :

@Andrew Syriosis it feasible for @Cherry Patterson to get these items (rent rolls, P&L and bank reconciliations, repair records) prior to initiation of a contract? I can see the leases coming after a contract has been accepted by the seller. But the analysis depends greatly on the items rent, repair records, etc in order to make an offer.

 It will probably be hard to get something like the bank reconciliations, but you should be able to get a P&L, rent roll and the like from the listing agent or seller just by contacting them. I would recommend, if possible, to review those prior to viewing the property.

Originally posted by @Andrew Syrios :
Originally posted by @Daria B.:

@Andrew Syriosis it feasible for @Cherry Patterson to get these items (rent rolls, P&L and bank reconciliations, repair records) prior to initiation of a contract? I can see the leases coming after a contract has been accepted by the seller. But the analysis depends greatly on the items rent, repair records, etc in order to make an offer.

 It will probably be hard to get something like the bank reconciliations, but you should be able to get a P&L, rent roll and the like from the listing agent or seller just by contacting them. I would recommend, if possible, to review those prior to viewing the property.

It would seem that she could at least get those to make a better informed decision. Also, 15-30 days (I think this is usually the general timeframe in the contract for inspection) doesn't seem like a lot of time to get, go over all the expenses, and run the numbers to make an informed decision. 

Would it be true that the more property being looked at the lengthier the time to decide. For instance, a SFR is well within the time for an inspection and appraisal. But in Cherry case she is looking at a multi family that will require more than one unit inspection and more time taken by the appraiser (if being financed). She also has to get these items as soon as the contract is accepted by the seller.

I guess a contingency could be added to the contract to allow for x amount of days to have the seller deliver these items and x amount of time to review and respond.

My thoughts would be to verify what the vacancy rates are in the area and also the property management fees for overseeing the property and related tenant issues. You certainly don't want to be handling that part of the deal. Especially if you're not located close to the property. Lastly, be sure to compute the Cash on cash returns and ROI. Are you entering into this alone or with other investors? (i.e. is it necessary to raise private funds via Reg D)