Hi, I want to start investing in Multi-families such as two and four families to start. Is there a formula to base my offer on so I know not to pay too much? I just looking a a general idea if I know the rents and a good idea of the expenses? Please, just keep it simple. Thanks
The BiggerPockets Rental Property Calculator is simple to use and will give you a couple free uses. Just plug in the income and expenses and it will do all the calculations for you!
@Chris Puglisi , thanks. Would their calculator also apply to multi-families?
Every market is different so it might be a little hard for someone to tell you if your deal is good or not (unless they happen to be in your market and can shed a little more light). My advice, practice analyzing many, many, many deals in your market and the more properties you run the numbers on, the better understanding you'll have of what you should come to expect in your area. When you know your numbers well, you'll know a great deal when it comes along.
For example, if you know certain variables in the equation (down payment percentage, loan amount, monthly payment, rental rates, whether you'll be paying utilities or the tenants pay them, taxes, insurance estimates, etc.) you can quickly estimate how much money you'll be making per door. Or calculate your cash-on-cash return. Or cap rates on larger multi-family properties. As previously mentioned, the calculators on BP are great.
Figure out your market, figure out your metrics, and then start making offers on properties that give you $XXX per door, or XX% cash-on-cash return.
One final thing to consider, just because a property on the "north" side of town yields a better return than a property on the "south" side of town on paper, doesn't necessarily make it a better investment. Always consider location, neighborhood, and type of tenant you'll be able to get in your property. Many times, properties in less desirable neighborhoods advertise higher rates of return but unless you have a unique skill set in dealing with difficult tenants, these advertised rates of return are very hard to achieve.
@Russ Smith, thank you
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