Exploring the possibilities in Detroit

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This is the first MF over 4 doors that I ran numbers for, I'm guessing I made a few mistakes. Can anyone find some room for improvements on my estimations/numbers? I GREATLY appreciate any and all constructive criticism!

After listening and then watching episode #331 with @Ashley Hamilton
I then read an article about how Ford is creating 3k jobs in detroit. 

so... 

I'm exploring the options of investing in Detroit. 

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Hi Patrick - IMHO, you are making the right move by focusing on multifamily, so I wish you well.

Took a look at you numbers and first question I have is why are you projecting a 90%/10% LTV? Do you have access to favorable financing or other special loan programs? Typically, 80%/20% is highest LTV you can get for conventional loans.

My next comment is on closing costs. They look low to me at $2,500. Your appraisal alone will cost somewhere around $2,000-$3,000. Depending on the reports/inspections your lender will require, I think you'd be safer underwriting closing and start up costs between $7,500 - $10,000, if not more. One thing I see a lot of people neglect to budget is seeding for the property's operating account. You will more than likely begin incurring expenses before you start collecting rents.

Diving into the income/expenses, your Other Income seems aggressive at $2,000/month (at 20-units, that's $100 per month a resident is spending assuming 100% occupancy). Depending on laundry/parking/vending machine situation, and your leasing policy, at most, I would underwrite around $20 per resident per month and hit that figure with your vacancy & collection loss factor. On my first run, I typically try to not underwrite any Other Income at all.

On the expense side, my initial reaction is that your Insurance expense seems very high at just under $38,000 per year. If this is accurate, this would be a big red flag for me. Find out why this is so high (Insurance expense should be somewhere in the range of $200-$300/Unit/Yr. range).

Also on the expense side, you only have $100 per month budgeted for utilities. I have to imagine trash removal alone would be a little over $100/month for a 20-unit project. It's difficult to provide guidance for the other utilities without knowing how your property is metered and how your leases are structured. Lacking direction from historical operating trends, after figuring out what is separately metered and who is responsible for what utility, I would then use a combination of common sense and reaching out to a local expert to underwrite each applicable utility. Use your knowledge of your own utility costs for your home and break it into a per square foot cost to then be applied to your unit size. You can also pose as a potential tenant and reach out to a local property management company or owner with a for rent sign and ask about typical utility costs for 1BR, 2BR, etc. units.

I do not see replacement reserves modeled either. Depending on age/condition of asset, I would be at $200/Unit/Yr. for newer properties and upwards of $400/Unit/Yr. for older, Class B-/C properties.

Finally, for income/expense trending, unless there is a very good reason, I would never project a lower growth rate for expenses as compared to the income growth rate. In fact, I typically model a higher expense growth rate and lower growth rate for income.

Good luck in your endeavors! Personally, I always buy for cash flow with the annual cash-on-cash return being my primary metric. While I will model the IRR because people want to see it, IRR is entirely too speculative for me and is not a reliable enough indicator when using other people's hard-earned cash.