[Calc Review] First time investor with capital
*This link comes directly from our calculators, based on information input by the member who posted.
Hey, just wanted a little feedback on this multifamily property. According to the analysis does the property look promising for a long term rental hold? I'm a first time investor, but I've been preparing for a year now. Any feedback would be appreciated.
The 6 percent interest rate seems low for an investment property with today's rates, so I would be prepared for that to be higher.
If this deal is in Tampa, it is great. If it is in an area with a declining population like Cincinnati I do not think there is enough meat on the bone.
Is this a SF or MF property, @Justin Knox?
Your income makes me think it's MF, but your expenses make me think it's a SF.
Quote from @Nathan Grabau:The Cincinnati metro area population is not declining. The population in the actual city limits, like many urban areas, may be smaller than the post WW2 peak population of 50-60 years ago but the metro area is healthy and growing. There are many well-known top companies here and plenty of good areas to invest in RE. Housing demand for the better areas of town is very strong. For example, the areas in Northern Kentucky by CVG airport (and not counted in the Cincinnati city population) are growing fast (DHL, Amazon, supporting logistics/warehouse companies, etc). We all should look beyond urban population numbers to judge the growth of a metro area/region.
The 6 percent interest rate seems low for an investment property with today's rates, so I would be prepared for that to be higher.
If this deal is in Tampa, it is great. If it is in an area with a declining population like Cincinnati I do not think there is enough meat on the bone.
Quote from @Lee Yoder:
Is this a SF or MF property, @Justin Knox?
Your income makes me think it's MF, but your expenses make me think it's a SF.
It's a MF, brand new construction
@Justin Knox - the numbers need a little adjusting; it's very important that the input is as accurate as possible and you make your decision based on what comes out. Too often newbies want a deal so badly, they massage the number to make the deal work. Here are a few changes:
1. As mentioned by @Nathan Grabau, 6% is low. I adjusted to 7%
2. Mgmt was adjusted from 7% to 8%. Either self-manage or pay a good company to do it. Don't try to skimp, the service you get will reflect that. 8%-10% is the going rate for good places.
3. Water/sewer & garbage will not be $65 for a duplex. It will either be $0 or $180ish - depending on who pays.
4. New construction means everything is new (awesome), however 2% and 4% for maintenance and CapEx seems low. 4%+4% is ok to start, but 6% total is skimping.
In the end, the numbers still work. They're just not as juicy as per your calculations. Good luck!
Tchaka
not to create an echo chamber but I agree with @Tchaka Owen that you should avoid massaging the numbers/expenses and if anything, over-estimate expenses to give yourself more room for error. I do wonder how many units this MF prop is if you're bringing in $7000/mo. But assuming you've done your research on rents in the area and that number is accurate, it looks like a solid deal for new construction. Tampa is a great market for appreciation so any cashflow will be an extra bonus!
Truthfully, even the adjustments seem off. Are you positive the rent is really 3.5k/unit? Usually with higher end units, your vacancy rate is higher too which I would move from 3 to 5%. It looks like you'll barely cashflow with.. 40% down? That's about right. It is for sure more of an appreciation than cashflow performance.
@Chris Webb maybe it's like .5-3% annual until you sell. Then the average hopefully increases to well above 10%.