How to much to pay per unit for a small multi family property
Hi
I wanted to find out how much per unit is everyone paying based on monthly rent.
I have a 12 unit property that I am negotiating with.
rents are 500 (1 bed/1 bth) and 600 (2 bed/1 bath). seller is asking close to 45k per unit which is little bit on the higher side I think.
Thanks
Most Popular Reply
What's your goal in investing? Are you buying with cash, hard money, private money, conventional money? What's your exit strategy?
Being multi-family, I'm going to assume you're a long term buy and hold landlord. Given you're asking this question, I'm going to assume you haven't maxed out your conventional loans.
To buy a MFH with conventional funding (30 years @ 5%) you'll need to put 25% down. To earn a 15% Cash on Cash return, the metric most buy and holders go by, the rents must be 1.5% of purchase price. That'd put this house in the $73k range, $90k is definitely too high.
At $90k, you'd put $22,500 into it as a down payment financing the remaining $67,500 for a mortgage payment of $362 a month. Using the 50% rule, your NOI would be $550 minus your P&I would be cash flow of $188 a month. $188 * 12 / $22,500 = 10% Cash on Cash return. Most of us set the bar at at least 15%, some aim for 20% or higher.
I pay around $30 - $35k a unit for MLS deals here in Utah... rents are $500 to 750 a month.