Close to closing my first rental property deal. No money down. Owner is going to owner finance me for 12months @ 3.5% and give me deed. Im goinging to cash out refi with a traditional loan in 6-8months to pay the note off with the owner but also use the cash glow to improve the property leading up to application for loan with community bank. Its a large 4 plex in a B+ A- community. Rents are $500 per unit. One unit is vacant. Purchase price will be $60k though thou tax value is $108k. Its needs windows now and roofing in 3-5yrs. How much cash flow should I want out of this property on a monthly basis given this scenerio? Thx for your responses in advance!
Can't tell you without knowing the expenses. You can use the 50% Rule to ballpark the NOI, then deduct your payments to get cash flow. Most investors are seeking 8% cash returns. But that's with money down. With no money down, the returns are unlimited, percentage-wise, but low $-wise.
You need the base amount of $100/door/month just to cover your projected expenses in the next 3-5 years. That would be on top of your normal expenses as the windows and roof are deferred maintenance. The previous owner already collected the rent to pay for that work but did not do it. To be safe you need a minimum $200/door positive cash flow day one of ownership
$500 per unit rent seems really low for a A/B market. Are you sure that is market rent.
Thanks for the replies @Marc C. and @Thomas S. I stand corrected the community where the property is located is B+ A- for this area. Market rents for multifamily apartment buildings in this area go for $325-$550. Rents can be raised to $550 after I complete renovations. My goal is to BRRR it with no money down through forced appreciation. I'm gonna budget 5K of my own money to repair the down unit and replace all the windows in the building. I'm definitely gonna run more analysis so I'm for certain that I can get my 5k back at bank closing after I pay the balance to the seller.
@Doyle Brown Jr. , you might want to run your reno numbers past a good local contractor. In my area $5k wouldn't be close to covering a unit renovation and multiple windows.
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