Am I getting my small MF costs right?
Hi All. I'm looking at a couple multifamily properties in Northern Michigan (local to me). They don't seem like good buys, but I'm concerned that I may just have my expense numbers wrong. Below is one of them. Am I missing anything, or including something I shouldn't? Or including things in NOI that I shouldn't? I have one rental, but this would be my first multifamily
I'm doing a lot of numbers on these as practice, and plan on touring it next week. Even if nothing comes of it, it is a good learning experience!
6 total units (3 duplexes, Four 2-bedrooms and Two 1-bedrooms)
Asking Price 196k (Has been on the market for 14 months. I think they got the price by adding the potential retail price of each duplex, not calculating NOI against CAP Rates for the area (8-9%))
Current Gross Rents: $2,525, I think this could be stabilized to about $3,100.
Thanks!
| Monthly Expenses | ||
| Cost Item | Cost | Estimate or Actual? |
| Included in NOI | ||
| Prop Taxes | $500 | Actual, seems high, maybe could be lowered |
| Insurance | $238 | Actual, number from Ins. Agent for Replacement cost, could insure at ACV |
| Water/Sewer | $170 | Actual, a couple residents have Washers, would charge them for this. |
| Trash | $19 | Actual |
| Electric | $0 | Estimate, Tenants pay |
| Gas (for Heat) | $0 | Estimate, Tenants pay |
| Landscape / Snow | $125 | Estimate, large shared parking lot, lots of grass, lots of snow |
| Accounting / Tax | $50 | Estimate |
| Legal | $30 | Estimate |
| Vacancy/Loss 10% | $253 | Estimate, number bank appraiser uses |
| Repairs & Maintenance 5% | $126 | Estimate, appears to be very little deferred maintence, would be confirmed |
| Management 10% | $253 | Estimate, would self manage, but to put against NOI |
| Total NOI Costs | $1,763 | |
| ................................................ | ||
| Not included in NOI | ||
| Financing | $606 | Assuming an offer of 100k, 75% bank financing, 20% seller financing |
| CAPEX | $125 | Estimate at $250/door/year, would be confirmed |
| Total Extra Costs | $731 | |
| ................................................ | ||
| Total Monthly Expenses | $2,495 |