Deal Analysis: Does this 6-Unit Portfolio make sense at a 6.2% Cap Rate? (Num Inside)
Hey everyone,
I am currently looking at a 6-unit residential portfolio and wanted to get the community's feedback on the underwriting. The units are fully occupied (all 2-bed, 1-bath units) and generating stable cash flow, but I want to make sure my expense assumptions aren't missing anything.Here is a breakdown of the current operating results:
- Purchase Price: $775,000
- Total Monthly Rent: $8,500 (Annual Gross: $102,000)
- Gross Rental Yield: 13.2%
- Net Operating Income (NOI): $47,677
- Going-in Cap Rate: 6.2%
Monthly Expense Breakdown Underwritten:
- Property Management (8.5%): $722.50
- Taxes: $587.38
- HOA Dues: $1,587.00
- Insurance: $100.00
- Repairs & Maintenance: $680.00
- Vacancy Reserve (10%): $850.00
- Total Monthly Expenses: $4,526.88
A few specific questions for local investors:
- HOA Fees: The HOA dues are quite high ($1,587/month). Does this level of HOA completely kill the deal for you, or does the 13.2% gross yield make up for it?
- Maintenance & Vacancy: I've budgeted 10% for vacancy and roughly 8% for maintenance. Is this realistic for this asset class in the current market?
- Value-Add: Rents currently range from $1,350 to $1,500. For anyone active in the area, do these look under-market for 2x1 units?
I’m trying to decide whether to move forward on this or assign it. I would love to hear how you would structure or negotiate this deal further.Drop your thoughts below, or feel free to send me a direct message if you want to look closer at the specific location details!