Attempt to Analyze a Toledo Fourplex

12 Replies

This isn't going to be a perfect analysis, probably far from it, but it may be a chance to get some feedback to improve the skill.
I looked on loopnet for a good Fourplex to analyze. I found this one; It's located in Toledo.
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] [https://www.loopnet.com/Listing/5544-Cresthaven-Ln-Toledo-OH/17059504/]
Looking through the page for useful information that I can put into a calculator, I find that they ask $230,000 for it. It has 4 units with $600 rent and no sign of vending machines or laundry, so $2,400 Gross Monthly Income, $28,800 Gross Annual Income. Need to account for Vacancy, though. Estimating 10%, the Effective Gross Income is $25,920. Now on to expenses; there doesn't appear to be any info on that on the page, but there is a Brochure PDF. 50% rule suggests they should be around $14,400
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The first page says it's fully occupied, well maintained, easy to manage, with opportunities to raise rents and lower assessment value. Sounds like standard salesy stuff. Second page is a Wall of Text disclaimer. Page 3 and 4 have more information, and page 5 looks like a NOI analysis, that should be useful for finding the expenses.
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Looks like the total expenses are… $15,801. That's actually more than the $14,400 estimate, and it doesn't account for everything on my calculator. Also they put 3% for their vacancy. But that's okay, I'll plug these numbers into my calculator, keeping the 10% vacancy. That brings our NOI to $11,119. Now Let's move on to the debt.
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If I were to pay it in full upfront, the cash flow would be the same as the NOI. But I don't have $230,000 lying around anywhere, so I'd need to get a loan. The standard loan has a 20% Down Payment, so mine would be $46,000 for a loan of $184,000. According to bankrate.com, assuming a 30 year at 4% interest (good assumption?), The monthly payment would be $1,249. That would make the Debt Service $14,988, and the cash flow at -$3,869. Yikes. Looks like the property could support itself, but not the loan. The maximum monthly payment it could support and still have $100 positive cash flow is $918.
So is it a good deal? From this analysis, not unless you can afford a 50% Down Payment. I think the real question is how could it work? Definitely would need to find ways to increase income and reduce expenses. Maybe I'm looking at the wrong exit strategy for this property. I doubt anyone would want to partner 5050 on the 50% DP for that kind of cash flow. It just doesn't sound like a good deal.
Okay well that's my attempt. It's probably really rough on the edges, maybe even cringy or stupid, but it's not here to be good. I hope to get some feedback and constructive criticism on it. Were there parts I missed? Things I didn't consider? Too wordy? Any advice for my next analysis? I don't really know how to end this either, so thanks for reading this. Have a great day!

P.S. Also I guess I'm kinda scared of networking. Not scared of meeting new people, but of not having anything to talk about. If I had lunch with someone I connect with here on BP, is this something I could talk about?

@Stephen McDonald Bow wow. Are you using actual numbers or guessing. Vacancy is high I use 8% of gross,vacancy of 5%, and capex of 10%. Let's assume new floors were put in yesterday. Life span in a rental is 8 years. With materials and installation it cost $6 sf in my area. you have 6000 sf of flooring. 6000*$6=$36000/8= $4500 yearly for floor capex vs your $1500 reserves. Still need to budget for flat roof 15 year life span, appliances and hot water heaters 12 years, hvac 20 years,etc. Your insurance looks low and taxes high(almost as much as your payment). With my changes you will lose an additional $4000 per year. Does your maintenance budget cover lawn care and snow removal. Usually garbage is also an expense.

Hi,

Good work in diving into the numbers.

We own property in that part of town also, just a few streets over.  You should be able to raise rents to increase income, and I have some other ideas also. 

However, this is more retail price.  As you see, you can't buy this property at it's current list price, and call it an asset.  It would be a liability.  Figure out what purchase price works for you, and if you're serious, make the offer based on that.  The interest rate is probably going to be closer to 5% if you are not going to live in one of the Units. 

If you have any other questions, reach out; Happy to help;

@Stephen McDonald

I actually own a property just a few houses down from this one. Wanted to make an offer on it but sellers agent was being difficult. Wanted an offer made before I could do a walk through. I said f it more deals will come. What I can tell you is that rent could definitely be much higher. This is a very safe neighbourhood with mix of renters and owners. Can’t type much now but it looks like your numbers are very conservative which is a good thing. Only problem is it will stop you from doing deals if you focus on just numbers and ignore hidden value.

Originally posted by @Michael P. :

@Stephen McDonald you could start with a single family in Toledo and easily be over 1% rent to value

Agreed with Michael.

Start slow and small and slowly build up.

I've done close to 1,000 SFH deals and recently started doing multifamily and have lost my A$$ on the first few.

It's a different breed of asset class.

Plus, property managers in Toledo are notoriously very bad.

I wish you much success 

For those of you that said that rents can be raised, what can it be raised to? I would agree that the interest rate will like be Low to mid 5 if it is non owner occupied. I just got an investor loan on a SFH at 5.375 with 25% down.

Also anyone know if they are going to redevelop the old southwyck mall.  

I think rents could be raised to as high as $750/unit, depending on condition.  I would bank on closer to $700 to be safe. 

Another fourplex near there sold recently for $210k (2BR 1.5BA units), so that might be a good gauge for you.  

@Tim Herman The property taxes are correct, the insurance might be bit low, but not much. I'm also not sure about your estimate for flooring @ $6/SF, assuming maybe you're talking about laminate or vinyl plank vs. carpet? 

@Stone Jin  I try not to make any predictions regarding development of the old Southwyck Mall space, it's changed hands (and had more promises made) more times than I can remember...