Potential Multi-family deal in 89015

[Frankie Baca]

Hey all, 

I'm looking at two off market properties for sale in Henderson, right off of Lake Mead/Boulder area.  One is an 8 unit with all 2bed/1bath, currently renting for $750 per unit.  The other is a 6 unit that rents 4 units for $750 and 2 of the units being 3 bedroom and renting for $850 per unit.  I'm still working on getting some numbers from the owner but as of right now, what I have is that all units are rented out, tenants pay for power and the owner pays for water/gas/sewage/trash.  The owner hasn't specified what the properties are worth to him but he said that he's interested in selling both and to give him an offer.

Multifamilies are few and far between in Henderson so I'm having trouble finding comparisons therefore I need to do a little more homework on typical cap rates, rents, etc.  If anyone has first hand knowledge with Henderson's market feel free to chime in.  I'd also love to work with someone with more experience if there is anyone wanting to get involved.

I'm going to need to finance the deal, so based on the current information and current income ($10,700) , I'd like to start by offering about $750,000. If my numbers are correct, mortgage would be around $4,000 which leaves $6,700 and then 50% rule $5,350 leaves us with $1,350 cash flow which would be just under $100/door.  I already see room for improvement which could drive the rent up but I'd like to get other people's opinions on the deal. 

The other thing I'd love to do is figure out numbers that would work with seller financing that would avoid the bank and give us a lower down payment. 

Any input is appreciated.  Thank you!

[Barri Griffiths]

Hey Frankie,

Congrats on finding some off market deals, and getting direct contact with the seller, that puts you in a good position right away.

you didn't specify what type of property it is and what the area is like. But I'm just going to assume it's a C class property in a ok neighborhood.

And before firing any kind of offer over I'd ask for some more information, so that you can get a better understanding of the property and the valuation. You'll need the t-12(the trailing 12 months income and expenses) and the rent roll.

But just to give you a down and dirty quick calculation again without knowing anything more apart from the numbers you gave.

On the 8 unit that's rented out at $750 each-

Calculations made on an annual basis 

750x8=6000

6000x12=7200

72000x0.1(10%vaccancy)=7,200

72,000-7,200=64,800

64,800x0.5(50%expenses)=32,400

NOI-$32,400

Market cap for C class is about 6-6.5% 

So let's be conservative and use 6%

Value is NOI/cap rate

So 32,400/0.06(6%cap)

=$540,000 valuation 

You can apply the same calculations to the 6 units and that should also give you and idea of where the value is.

I hope this helps, feel free to reach to me with any further questions, I'll be glad to help In any way I can!

Cheers 

Barri