4-Plex

[Jimmy Park]

Hi all - wanted to get feedback on a particular deal, would really appreciate any input as I would be a first time purchaser. Details below, numbers are approximate:

+ Asking Price: > ~$400,000

+ Rental information (all 3 bdr 2 ba, 100% occupied currently): 2 units at $950/month, 2 units at $1,000/month >> Gross Rental Income = $3,900/month

+ Financing info: conventional, 25% down, 30 years >> $1,700/month

+ Property Tax: ~$760/month

+ Insurance: ~$440/month

+ Other operating expenses: seller shared that it's ~$350/month

So it looks like assuming a deal at $425k, I'd be looking at ~6.5% cap rate.

(1) Are the P&L items reasonable?

(2) What are the important questions to ask? (I know I need to ask for the historical schedule E's, schools are highly rated in the area, but unsure about what the most important details would be in making a purchase)

Thanks for your help in advance!

Jimmy

[James Syed]

@Jimmy Park Welcome to BP.

Your analysis is missing many things.

1. Property management (someone has to do this, even if you do, your time is worth something)

2. Capital Replacement (things will break down over time)

3. Vacancy Rate (your property will NOT be rented forever, appraiser will use at

5% vacancy rate when appraising this income property)

$440 a month for insurance? That is very high insurance.

You need to do a detailed due diligence. Average expense ratio for a multifamily is between 40% - 60% with property management.

Hope it helps.