Updated over 4 years ago on . Most recent reply
Commercial Multifamily Deal: Good Deal or No?
Greetings good people,
I am hoping to get some feedback from those more experienced than I on this deal. I own one property (duplex) and am new to commercial properties. I only have rough #s, but believe it would look like the following.
Property in question:
8 unit multifamily (Units are 2 bed/1 bath, built in 1992)
Asking price : $1,150,000
Annual taxes: $6,860
Mortgage estimate : $4900/month
Rents: unsure but likely approx. $1000/unit
After PITI, prop. management/vacancy/ expense savings I am seeing cash flow of $1200/month.
Financing:
Down payment: 25% via cash out refi my duplex (it has appreciated alot)
Remainder will be financed.
The conundrum:
Duplex currently cashflows at $800 (after prop. management, vacancy, save for expenses, etc). If I refi the cash flow will likely change to $0. BUT, I would now also have an 8-plex.
Duplex purchase price: $265K
Duplex current market value : possibly $700k
Also, I am unsure on the cash on cash return for the 8 plex, which I believe would be around 5%. I think this is low, but each unit would cashflow at $150/month which seems reasonable. For the area I am in (western Washington) the price on this property is pretty good. An additional thought is to sell the duplex, but I am reluctant as it is in an excellent town in an excellent neighborhood.
Much thanks to anyone willing to give feedback, ask me questions etc.
Most Popular Reply
Your thinking and your math are single family oriented (duplexes are treated as single family for financing).
The math and business plans are different in multifamily (5+ units). You haven't provided enough information to assess if this is a good multifamily deal outside of the initial CoC. What are your opportunities to grow NOI and CoC?