Need help analyzing a multi-family deal

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Hello BP community.I need some help.This is my first post on here, but I’ve been quietly monitoring the forums, reading books, and listening to the BP podcasts for a while now.I’m currently negotiating a deal on a multi-family property, and as this would be my first multi-family, I wanted to get a sanity check and see what the great minds of BP thoughts are on this potential deal.Here’s the info:

Property description: 5 unit multi-family with all units currently rented.One unit is on a year lease, and the other 4 are on month to month.There is a sixth unit that has never been finished, but I plan to finish the unit upon purchase.There is currently no laundry on site, but if possible, I would like to add a community laundry as part of the unfinished space in the sixth unit.Additionally, there are 4 garages on the property that are currently rented as storage units.The units are all separately metered (including the 6th unit).The landlord currently pays the heating bill for the entire property because it is using steam heat and boiler.I plan to add electric heaters to each room and get rid of the boiler as this would allow me to transfer the heating cost to the tenants, and they would be able to control their own temperature.My rough estimate (I have not got bids yet) for the rehab of the 6th unit/laundry and adding electric heaters to the units is 25K.

Purchase price: currently negotiating (approx 250K)

Income:

Current Rents:units 1-4: 549/mo.Unit 5: 595/mo = $2791/mo

Garages: 4 x 70/ mo = $280/mo

Proposed Rental Income = $3,436 (6th unit at $595/mo plus laundry at $50/mo)

Expenses:

w/s/g = $475/mo

Insurance= $106/mo

Maint/repairs = $317/mo

Gas = $180/mo (boiler steam heat cost)

Property Management = $274/mo

Property Taxes = $184/mo

Vacancy rate is sitting around 1%-2%

The going cap rate for the area is 7%-8%


After finishing the sixth unit I plan to rent it out for $595/mo. My cash flow after completing the sixth unit and accounting for vacancy and capEx, and property management would be approximately $300/mo.I realize this not very high, but this is partly due to the fact that I would be paying interest on the down payment and rehab costs as that money would be pulled from my HELOC (I will be using my HELOC to finance the down payment and rehab costs).

What do you think?Is this deal worth pursuing?My goal would be to hold the property long term, with cash flow being the most important factor to me.I have no experience with commercial property, but was hoping that after adding the 6th unit, the property would appraise between $330K-$350K and I would be able to pull the majority of my HELOC money back out.Thoughts? Input?

Thank you.