Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
7y
Seems really low. I only have duplexes, so, not really MF on a big scale. And I wouldn't touch a duplex with $ 100 potential profit per side.
Also, it depends on how you calculate. $ 100 - after what deduction?
Keep in mind that banks/mortgage companies only count 75% of your rental income for you to qualify for another mortgage. So, if your cost of the unit is $ 900 and your rent is $ 1000 and you consider the difference your profit ......the bank will only count $ 750 as rental income. So, with such a low margin it would be difficult to get future financing.
Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
7y
Seems really low. I only have duplexes, so, not really MF on a big scale. And I wouldn't touch a duplex with $ 100 potential profit per side.
Also, it depends on how you calculate. $ 100 - after what deduction?
Keep in mind that banks/mortgage companies only count 75% of your rental income for you to qualify for another mortgage. So, if your cost of the unit is $ 900 and your rent is $ 1000 and you consider the difference your profit ......the bank will only count $ 750 as rental income. So, with such a low margin it would be difficult to get future financing.
Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
7y
@James Monaghan, really depends on the market and property type. I like deals with at least $150/unit/month, but don't expect amazing appreciation. There are a lot of markets where it's very difficult to cash flow, but see great appreciation. What are your investing goals?
Kansas City, MO · Member since 2017 · 144 posts · 148 votes
7y
I agree with @Jaysen Medhurst. Your per door profit varies a lot...I personally don't want to see less than $200/door on my multifamily deals, and that is considering 10 or greater doors. If I had less than 10 doors I would want that per door amount to go up. With lower cash flow per month a couple vacancies or one bad tenant and you can lose all the income.
Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
7y
Insurance and maintenance seem too high ... Based off the HOA depending what it covers. 238 is a lot for a 55k property I'd see what it covers.
For what it's worth I'm averaging about 90/door for insurance on a house and duplex both with rebuild values around 250k. I'm not saying my deal is good but it's cheaper than your estimate for much higher coverage.
Also after expenses (mortage, tax, insurance, HOA) about 400/door. I also have reserve account to operate properties vs using flat percentage eat mo for items.
Rental Property Investor · Houston, TX · Member since 2018 · 174 posts · 100 votes
7y
Yeah I’ve looked and said no to larger hoa due deals. Those numbers likely worked when the seller bought the deal but often don’t work well in today’s Houston market.
Houston TX · Member since 2018 · 12 posts · 1 vote
7y
Hi Faraad /Ryan,
Thanks for the message.
Units were off Westheimer near the Galleria. I based this figure on info provided by my broker. I agree it does seem high, but this was the info provided.
Bottom line I don't think this is the correct route for me to go down. High HOA fees are killing the deal and it was confirmed they just include cable no other utilities. The facilities are not that great either. It's a lower end B grade building in my book.
Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
7y
I think you would need to compare apples to apples. Are folks talking about net operating profit per door (ie not including financing, depreciation, etc) or with financing and or with other deductions?
once you set the criteria you will get better info :)
Specialist · Northern CA · Member since 2014 · 154 posts · 57 votes
7y
@James Monaghan cost are much higher running separate units when considering future cap ex (spectate roofs, plumbing, electrical, etc etc). Those margins are way to tight. Stay away as HOA will only go up in the future not down. They also control a lot of outside factors that do not give you full control of your property to do with as you wish at times.
Kansas City, MO · Member since 2017 · 144 posts · 148 votes
7y
440 E Meyer Duplex - I AirBnb with an average Gross rent $4000/month with a 2k mortgage and tax bill each month $800 PM cost, $300 utilities - Rough monthly income of $900 on 2 doors. My 22 unit is still new but that is expected $5000 net/month at $227/door
Kansas City, MO · Member since 2017 · 144 posts · 148 votes
7y
I don't have any smaller multifamily in my portfolio that is long term rental. If I was buying something that size I would negotiate the price such that I got those numbers. If I wasn't getting those numbers I probably wouldn't be the Buyer for that property.
Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
7y
@James Monaghan looking for an average profit per door nationally is not realistic. I know that I shoot for $200 per door in net cash flow on my apartment buildings, although that is not always achievable. There are a lot of ways to measure your profit, and cash flow per door is only one of them. I also look at forced appreciation, which is one of the strongest tools in my tool belt in the value add apartment space.
Another way to look at the "cash flow per door" metric is as a hedge against worst case scenarios. As long as you are getting 150-200 per door on larger multifamily, you can afford to have a vacancy or a major repair and still break even for the month. Once you get thinner on cash flow, you dip into your reserves more.